The latest VISA/VECCI Business Trends and Prospects Survey reveals that businesses expect weaker trading conditions over the next twelve months.
VECCI's Chief Executive Officer, Mr Wayne Kayler-Thomson says sharemarket volatility, drought and costs associated with higher interest rates, higher fuel prices, a strong Australian dollar and wage pressures as a result of skills and labour shortages have hit Victorian business – and the State Government has a golden opportunity to provide an injection of confidence through cost relief in next month's State Budget.
"The survey of a cross-section of Victorian businesses taken in mid-March 2008 revealed that after a period of solid growth and optimistic expectations, business confidence in the short-term outlook for the Australian economy declined over the March quarter 2008, with only 9 per cent of respondents anticipating stronger economic growth over the next twelve months", says Mr Kayler-Thomson.
"The results show a significant softening in sentiment when compared to previous surveys - in the December quarter 2007, seventeen per cent of respondents anticipated stronger economic growth over the next twelve months, and 27 percent expected stronger growth in the March quarter 2007.
"Only 6 percent of respondents expected stronger economic conditions for Victoria in the year ahead, down from 15 percent in the previous quarter and 22 percent in the March quarter 2007. Overall, metropolitan businesses are slightly more optimistic than their regional counterparts, with 11 per cent expecting stronger economic conditions over the year ahead, compared with 6 per cent of regional respondents.
"Trading conditions improved slightly in the March quarter, with small rises in general business conditions, sales and selling prices, although general business conditions are expected to deteriorate in the June quarter.
"While coming off a relatively high base, the downward direction of business confidence highlights the need for the upcoming Victorian State Budget to deliver an injection of confidence - an immediate 10 percent reduction in the WorkCover premiums that most Victorian businesses pay, as well as payroll and land tax relief, cuts in red tape and significant investment in transport infrastructure would provide a `shot in the arm' to a business community that has been battered by events largely beyond its control", says Mr Kayler-Thomson.
Summary of results
- Following a period of relatively strong growth over 2007, trading conditions for Victorian business weakened during the March quarter 2008. While survey respondents reported a small improvement in general business conditions, sales, and selling prices over the quarter, results were weaker than in the previous quarter. In the face of continuing widespread wages growth and intense market competition, a decline in profitability was reported.
- Weaker trading conditions are anticipated over the next three months with general business conditions and profitability expected to decline, along with weaker growth in sales. However, moderate growth in selling prices is anticipated. Investment in both plant and equipment, and buildings and structures is expected to weaken.
- VECCI's Business Sentiment Index for the Australian economy weakened further over the March quarter 2008, with a decline in the proportion of respondents anticipating stronger economic growth over the next twelve months. A total of 9 per cent of survey respondents indicated that they expect stronger economic growth, down from 17 per cent in the previous quarter and 27 per cent in the March quarter 2007. At the same time, 30 per cent of respondents expect no change in national economic conditions and 62 per cent anticipate a weakening.
- Business confidence in the short-term outlook for the Victorian economy also moderated. A total of 6 per cent of respondents in the March quarter 2008 expect stronger state economic conditions over the year ahead (down from 15 per cent in the previous quarter and 22 per cent in March 2007).
- Over the past quarter, metropolitan survey respondents generally reported slightly stronger trading conditions than their regional counterparts. While metropolitan businesses reported a small improvement in general business conditions, regional businesses reported a small decline. While profitability declined for businesses across the state, the decline was more pronounced for regional businesses. Sales levels and selling prices improved moderately for metropolitan businesses, but showed only a slight improvement for regional businesses. Similarly, investment for metropolitan businesses improved moderately, but declined moderately for regional businesses. Growth in wages was widespread across the state, but more so for regional businesses.
- Metropolitan survey respondents were slightly more optimistic about the outlook for the Australian economy than their regional counterparts. However, the level of optimism was consistent across metropolitan and regional businesses with regard to the outlook for the Victorian economy, with few expecting stronger conditions over the next twelve months.
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