By Charles Pauka
Australian businesses don’t plan to employ new staff in the months ahead in an indication they expect the current period of weak economic growth to continue in the new financial year.
Dun & Bradstreet’s latest Business Expectations Survey reveals that the hiring expectations of businesses have now declined for six consecutive quarters, with the employment index for Q3 2013 falling to -3.3 points, its lowest level in four years.
Excepting those in the transportation, communications and utilities sector, which recorded a flat result, businesses from all of the industries surveyed expect to decrease their employment in Q3. Companies in the construction, manufacturing and retail sectors expect the greatest level of employment reduction.
With actual employment activity over the past 12-months tracking downwards with the survey’s forward-looking index, these latest findings suggest that last month’s series of company job cuts and off-shoring announcements may not be in isolation. Last week the ABS also reported a 7.3 per cent fall in total job vacancies in the three months to May.
Operating costs, weak sales and cash-flow appear to be limiting businesses’ capacity to hire new staff, while an uncertain economy and approaching Federal Election are factors affecting demand for new labour.
“With little spark to be found in the domestic economy businesses are wary of investing, instead focusing on their core operations and controlling their costs,” said Gareth Jones, Dun & Bradstreet’s chief executive officer.
“This is a continuation of what businesses have been saying throughout the first half of the year – that they won’t seek new credit to grow their business and that they won’t be increasing employment and other significant forms of business spending,” he said.
“It appears businesses don’t see any substantial improvement in trading conditions in the new financial year to make them prepare for growth, while the upcoming federal election is also creating uncertainty and dampening new activity.”
According to the Business Expectations Survey, 25 per cent of businesses view a weak demand for their products as the biggest barrier to growth in the September quarter. This is reflected in the survey’s low sales expectations index, which has fallen steeply from 13.5 in the previous quarter to 4.9 points.
In addition to a weak sales outlook, the profits index for the next three months has edged lower to 13.2 points, compared to 14.2 in the previous quarter. This softer outlook appears to have been impacted not just by lower sales expectations, but also the cost of doing business. Forty-two per cent of executives surveyed cite operational costs as the factor most likely to limit their future growth.
“The business sector is unambiguously preparing for weaker activity, with broad-based declines in the key components of the D&B Business Expectations Survey,” said Stephen Koukoulas, economic advisor to Dun & Bradstreet.
“Of most concern is the scaling back in employment intentions, which points to net job shedding and undoubtedly a rise in the unemployment rate in the next few months,” he said.
“These business expectations point to the opportunity for the RBA to further cut interest rates particularly as the survey also shows weakness in expected sales and a softer profit outlook.
“While there appears to be some pick-up in expected selling prices on the back of the recent fall of the Australian dollar, this increase is from a historically low base. It would be unlikely to deter the central bank from cutting interest rates given the more problematic big-picture view of the economy,” Mr Koukoulas added.
This article first appeared on TandLnews.com.au