The latest Visa - VECCI Business Trends and Prospects Survey shows that the short-term business outlook has improved at both a national and a State level.

 

VECCI's Chief Executive Officer, Mr Neil Coulson, says the survey of a cross-section of Victorian businesses taken in mid-March 2006 indicated improving business confidence going forward.

 

"The Visa-VECCI Business Sentiment Index for the Australian economy improved over the March quarter, signalling an improvement in the business community's perceptions of the national economic outlook for the next twelve months, with 30 percent of respondents anticipating that the Australian economy will experience stronger growth over this period, up from 26 percent in the December quarter 2005.

 

"In terms of local prospects, 25 percent of surveyed businesses believe the State economy will experience stronger growth during the next twelve months, up slightly from the 23 percent of respondents holding this view in the December quarter survey. In all, 21 percent of those surveyed anticipate that Victoria's economic performance will be weaker during the next twelve months, a decrease on the December quarter survey when 24 percent of respondents held this view.

 

"Trading conditions were mixed during the March quarter 2006, with improvements in general business conditions, sales, exports, selling prices, employment and plant and equipment investment being reported. However, profitability fell, possibly influenced by higher wages and other labour costs and fuel prices increases.

 

"Since the survey was taken, however, fuel prices have risen further and there has been an interest rate rise. Furthermore, more broadly, manufacturing and services jobs are under intense pressure from overseas competition, and the Queensland and Western Australia economies are now growing much more rapidly than Victoria.

 

"While last week's Federal Budget used the surplus to provide personal income tax relief, which will offset some of the pain felt by consumers at the bowser and the bank, the Victorian Government should follow suit in its upcoming Budget.

 

"While the State Government has little control over globalisation, world oil prices or interest rates, it can reduce business taxes, namely payroll and land taxes, and provide additional WorkCover relief.

 

"We would argue that, with a Budget surplus of nearly $800 million in 2004/05, the State Government can afford to reduce payroll tax from 5.25 percent to 4.95 percent, at a cost of only $150 million", says Mr Coulson.

 

 

 

Trading conditions were mixed during the March quarter 2006 in comparison to the December quarter 2005. Trends in sales levels, wages growth, other labour costs, profits and capital investment all eased during the March quarter 2006. General business conditions, sales, wages, other labour costs, and employment levels are all expected to rise over the next three months, but not at the levels previously seen in the last three months of 2005. Profitability declined during the March quarter and this trend is predicted to continue until the end of the financial year.

 

The Visa - VECCI Business Sentiment Index for the Australian economy rose again over the March quarter, signalling an improvement in the business community's perceptions of the prospects for the national economy over the next twelve months. A total of 30 percent of respondents anticipate that the Australian economy will experience stronger growth over this period. This figure is higher than the December quarter 2005 figure of 26 percent and the September quarter 2005 survey, where 21 of respondents held this view.

 

A noticeable proportion of respondents in the Transport and Storage (48%), Education, Health and Community services (36%) and Recreation, Personal and Other services (40%) sectors believe that Australia's economic performance will strengthen over the twelve months to March 2007.

 

In contrast, a number of Manufacturing sector respondents (24%) believe that national economic conditions will weaken over the forward period.

 

Victoria's economic outlook improved over the past three months, with a total of 25 percent of surveyed businesses anticipating that the State's economy will experience stronger growth during the next twelve months, up from the 23 percent of respondents holding this view in the December quarter 2005 survey and 16 percent of respondents holding this view in the September quarter 2005 survey.

 

A notable proportion of respondents in the Wholesale and Retail Trade sector (26%) and Recreational, Personal and Other Services sectors (23%) believe that Victoria's economic performance will strengthen over the twelve months to March 2007.

 

In contrast, Manufacturing (30%) and Building and Construction (26%) were industries where a sizeable number of respondents believe that Victoria's economic conditions will weaken over the forward period.