Greg Evans
Growth signs encouraging, but recovery not entrenched
 Australia’s broader business community is now more confident about the outlook for the next six months and beyond. But these tentative signs of improvement do not yet indicate the economic good times are back. The Q3 2009 edition of the ACCI–Westpac Survey of Industrial Trends revealed general business sentiment was recovering rapidly, while the ACCI-Westpac Actual Composite Index had risen to the verge of indicating expanding business activity. The businesses surveyed believed the predictive Expected Composite Index would reach its highest point since late 2007 in Q4 2009, signalling a level of confidence not seen since the economic downturn and Global Financial Crisis took hold. As the peak body for Australian business, we welcome the return to an expansionary outlook. We played a key consultative role in the Federal Government’s formulation of the fiscal stimulus packages that helped keep Australia out of recession. With one of the first casualties of the turmoil likely to be business spending, we proposed, and had accepted by the Government, the business investment allowance that has helped drive economic growth. However, despite recent Reserve Bank of Australia (RBA) moves to raise interest rates we would caution that business conditions remains fragile and employment is likely to deteriorate into 2010. Business investment is also not likely to recover to pre-GFC levels quickly and the real strength of the domestic economy is only likely to be exposed once stimulus measures such as the business investment allowance are wound down. One of the core issues that private and other businesses face is relatively soft demand and insufficient retained earnings. Following the downturn, there are simply not enough funds within businesses to provide for expansion and growth. This is exacerbated by difficulties in accessing credit. We would like to see banks start lending more actively again, especially to the small and medium-sized business sector. This makes it very important that there is competition in the financial services sector. We are concerned that there has been a reduction in competition due to the exiting of foreign banks and non-bank lenders from the Australian market. These and other challenges, including reform of Australia’s tax system to make businesses more competitive, are being addressed by the ACCI based upon the feedback received through state chambers of commerce and national business associations. We encourage more private businesses to take the opportunity to influence the national debate on issues that directly affect them by joining our constituent groups. With gradual improvement rather than robust growth on the horizon, the Private Business Barometer provides a valuable insight into the experiences and outlook of a particularly vigorous, entrepreneurial sector. We note that the Private Business Barometer findings largely echo those of ACCI surveys and add weight to our conclusion that the recovery, while welcome, is not yet fully underway. If the private business community learns its lessons from the downturn, works harder to influence its operating environment and pushes for support from stakeholders including the financial sector, I’m confident it can further entrench its position as a key engine of economic growth in Australia. | | Greg Evans Economics and Industry Policy Director Australian Chamber of Commerce and Industry (ACCI) |