Capital investment expectations have reached the highest level in nearly 10 years, according to the latest Dun & Bradstreet National Business Expectations Survey.
The survey shows one in three (31 per cent) Australian businesses expect to boost their long-term investments in the New Year. This follows an overall uptick in actual capital investment over the past seven quarters and official statistics indicate productivity growth.
The projected capital investment index for the March quarter 2013 is at 20. This is up five points on the December quarter 2012 and follows an eight point increase the prior quarter. The capital investment outlook is now 14 points higher than the ten-year average index of six.
Dun & Bradstreet's CEO Gareth Jones said the optimistic capital investment projections signal improved business sentiment.
"A surge in the investment index to its highest level since the September quarter 2003 highlights a renewed focus on productivity improvements. Additionally, the recent upward trend in actual investment demonstrates that an increasing number of businesses are able to fund capital projects, which will be a key driver of productivity growth over the coming years,” he said.
"A continuation of these trends will support productivity gains and in turn, support solid GDP growth in the years ahead."
The D&B survey reveals that other key business indices are also in positive territory. Sales expectations have reached the second highest level in eight quarters, at an index of 23. This is 11 points above the ten-year average index. Additionally, profits are up two points to an index of 22, the highest level in eight quarters; and employment expectations have increased by two points to an index of three. The inventories index is at 20, the second highest level in ten years and 18 points above the ten-year average index.
Selling prices have remained largely unchanged from December quarter expectations. The index, which is now at 11 for March quarter 2013, is currently just two points above the index of nine for March quarter 2010 – the lowest level recorded since 1988.
According to D&B's economic advisor Stephen Koukoulas, the rebound in investment expectations is welcome news.
"It suggests that firms are responding to lower interest rates and are taking a more upbeat view of the economy into 2013. Those upbeat views on investment are also reflected in the solid level for sales and employment expectations,” he said.
"The favourable outlook for economic growth is complemented by subdued selling prices, a sure sign that inflation pressures are absent and are a further reason why lower official interest rates from the Reserve Bank are likely to be delivered."