Economic meltdown to continue into the New Year

The New Year is expected to see the financial crisis continuing, with sales and profits expectations plummeting and selling prices expectations hitting record high.

According to the latest Dun & Bradstreet (D&B) business expectations survey, sales and profits expectations for the March quarter 2009 have sunken further into negative territory, down 50 points from the highs of the December quarter 2007.

The selling prices index has climbed 17 points to 79, the highest figure ever recorded by the survey, while the capital investment index has flat-lined.

About a quarter of executives indicated recent changes in credit market conditions hurt their businesses, with more than two-thirds of executives reporting the dramatic weakening the Australian dollar since July had a negative impact on their operations.

Despite a 25-per cent fall in the number of businesses affected by petrol prices, 68 per cent of firms still identified fuel costs as one of their concerns.

D&B corporate affairs director Damian Karmelich said Australia failed to escape the fallout of the global financial turmoil, leading to a persistent fall in executive expectations for the New Year.

“The credit crisis has made it more difficult for Australian businesses to access funds – it has also caused significant volatility in the Australian dollar. As a result, executive confidence has declined sharply, with expectations falling to levels not seen since the 1990s.

“Australia remains one of the few OECD economies in which central bank rates can influence the day-to-day functioning of national credit markets however with selling price expectations at record levels, inflationary pressures could weigh on the Reserve Bank’s decisions for further interest rate cuts,” Mr Karmelich said.

Interest rates have been named the top concern for executives, with 48 per cent expecting rates to be their key issue in the upcoming quarter.

Despite worsening business circumstances, D&B economic consultant Duncan Ironmonger said Australia would ward off a recession with GDP growth expected to remain positive in 2009.

“The Federal Government will provide further fiscal stimulus as necessary and the lower value of the Australian dollar will encourage domestic spending and exports whilst discouraging imports. This situation will help to maintain domestic production and jobs, with unemployment expected to stay below 5.5 per cent in 2009,” Dr Ironmonger said.

“Despite the slowdown in world growth, Australia will not experience a recession.”

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