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Government uncertainty highlighted as business confidence continues to waver: ACCI Report

The economy continues to be a source of worry for Australian businesses, pushing business confidence down for yet another quarter.

According to the latest Business Expectations Survey from the Australian Chamber of Commerce and Industry (ACCI), business expectations for their own conditions fell in the first quarter of 2015, while the recent improvement in actual business conditions slowed.

The December quarter saw the Expected Economic Performance index fall 2.5 points to 45.5, while General Business Conditions saw a small rise to just below neutral level. Overall business expectations for their own general conditions currently sit at 48.1, continuing to fall for the fourth consecutive quarter.

“Businesses remain pessimistic about the year ahead for the Australian economy. Uncertainty about the passage of many elements of the Government’s reform agenda and headwinds from abroad continue to weigh on business owners’ minds,” Kate Carnell AO, CEO of ACCI, said.

“The Government needs to use the upcoming budget to give momentum to its reform efforts by explaining the need for change. The Government has embarked upon many worthwhile reforms, including deregulation, repairing the budget and improving competition policy and the financial system. But overwhelmingly, business needs to see concrete steps being taken.”

Sales Revenue saw a slight rise during the December quarter, rising slightly above the neutral 50 benchmark (currently at 50.7) for the first time in three and a half years. Meanwhile, the Profits index continues its almost seven-year run inside contractionary territory (currently at 42.5).

Ms Carnell believes more assured Government decisions would help business confidence climb, citing debates on tax, industrial relations and federation as examples of policies that need solid action.

“The Government must ensure that the community has a say but that these major upcoming reviews are not used as excuses for inaction. If there are sensible steps the government can take now, they should take them without delay,” Ms Carnell said.

“Business confidence will only return once businesses see the government enacting a well-considered long-term reform agenda, with the support of the parliament, in the national interest. The time for petty politicking is over.”

ACCI Senior Economist Scott Kompo-Harms said while a variety of indicators are showing improvement, most remain under neutral levels.

“Indicators for actual conditions in sales, profits, employment, overtime utilisation, investment in buildings and structures, and investment in plant and equipment all showed improvement during the quarter, continuing the trends evident over the past 12 to 18 months,” Mr Kompo-Harms said.

“Some of these indicators are now approaching neutral levels but all of them remain in contractionary territory. The profits index in particular continues to exhibit considerable weakness. Indexes on wage growth and non-wage labour costs continue to moderate, consistent with ongoing labour market weakness.”