A double whammy from China and Queensland inactivity threatens economy

Monday 15 February, 2016 | By: Darrell Giles | Tags: Pulse, Westpac, business confidence, Federal Election

A double whammy of an economic downturn in China and State Government inactivity on the home-front threatens to derail Queensland small business confidence in 2016.

The Westpac Group-CCIQ Pulse Survey of Business Conditions for the December Quarter voices concern about the state’s economic growth prospects as business confidence slips for Queensland.

CCIQ Director of Advocacy Nick Behrens said business expectations for the Australian economy also softened as recent international events, including slowing growth in China and stock market volatility, weighed on business.

“Overall in the last three months, confidence in the national outlook has fallen below neutral territory. On a positive note, the low Australian dollar, interest rates and oil prices are expected to support economic activity over the coming 12 months,” he said.

“Confidence in the Queensland economy deteriorated with both China and the ‘perceived’ inaction of the State Government on the economy and infrastructure dampening business confidence.

“General business conditions remained relatively unchanged in the three months to December, but continue to be short of what is needed.”

Mr Behrens said the Pulse survey showed sales and revenue declined slightly, despite businesses reporting sales in the lead-up to Christmas had been stronger than recent years.

“Capital expenditure rose marginally to be just below neutral territory and businesses reported higher profitability, in part because of weaker labour cost pressures.

“There was a slight fall in employment in the December quarter with continued resource sector consolidation weighing on many regional parts of Queensland.

“While the current economic picture is undoubtedly challenging, there is mild optimism for improving general business conditions and sales growth for the early months of 2016.”

“In summary, businesses were more positive about their own business during the December quarter and are mildly optimistic for the March quarter, but are collectively lacking confidence for the Queensland economy across 2016.”

Mr Behrens said the more than 650 small business polled in the Pulse survey said business confidence for the Queensland economy fell, with concerns cited in relation to an under-performing China, lack of State Government infrastructure investment, downturn in the resources sector, financial market volatility and the forthcoming Federal Election.

“Businesses have responded positively to a lower Australian dollar, lower interest rates, lower oil prices, progress made on the Free Trade Agreements and Federal Government leadership under new Prime Minister Malcolm Turnbull,” he said.

Jamie Ritchie, Westpac’s Queensland State General Manager for Small Business Banking, was encouraged by the latest Pulse results.

"It is pleasing to see an increase in activity and investment in the Queensland SME business market in the New Year,” he said.

“A lower Australian dollar will certainly assist many of our SME customers in Queensland, especially those in the competitive tourism industry, and will continue to spark higher levels of economic activity.”

Finger on the Pulse:

12 MONTH OUTLOOK: Business confidence for both the Queensland and National economies fell. Confidence in the Australian economy (47.2) is higher than the State (41.1). For every business citing a strengthening outlook for the Queensland economy there are two citing a negative outlook.

GENERAL BUSINESS CONDITIONS: The Pulse General Business Conditions Index was steady at 44.9 in the December quarter with the overall environment remaining soft. Business expectations for the coming March quarter appear to be heading back toward neutral territory (49.2).

SALES & REVENUE: The Pulse Sales and Revenue Index remains in positive territory but fell slightly (50.2) in the December quarter. Sales and revenue are set to rise further, with the Index forecast at 54.5 for the March quarter.

LABOUR COSTS: The Pulse Labour Costs Index fell slightly to 55.4 in the December quarter, with 70 per cent of businesses reporting either stable or falling labour costs in the past three months.

PROFITABILITY: Profitability index rose to 44.3 in the December quarter but remains stubbornly in negative territory. The majority of businesses reported similar (38 per cent) or weaker (41 per cent) profitability levels in the three months to December 2015. Expectations for the coming March quarter see the index levelling towards neutral territory.

EMPLOYMENT LEVELS: Employment levels fell slightly over the December quarter to 47.6, largely as a result of down-sizing in regional Queensland.  Some 68 per cent of businesses expect to keep employment levels steady in the three months to March.

CAPITAL EXPENDITURE: The Pulse Capital Expenditure Index rose to 47.4 in the December quarter. The Index is forecast to remain relatively unchanged (47.0) in the forthcoming March quarter.

 Biz Confidence 16

 New Biz 12 months 16


Pulse is the largest survey of Queensland businesses, providing critical insights into the sentiment of business owners and managers across the State. The survey period is for 12-22 January 2016 and covers sentiment from over 650 Queensland businesses through the quarter to December 2015 and looking forward to the quarter ahead to March 2016. An Index score above 50 represents strengthening prospects for the indicator and an index score below 50 indicates weakening prospects.


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