Help us improve our website by completing a quick survey. Start survey now

Cautious confidence among Australia’s mid-market

Media release

CommBank can

Media release

Cautious confidence among Australia’s mid-market

  • Business mid-market confidence continues to rise in latest quarter
  • Confidence levels vary by industry sector and geography
  • Mining sector has returned to optimism
  • Increasing focus on growth initiatives

Embargoed until 00.01 (AEST) 24 April 2013: Commonwealth Bank’s Future Business Index today reveals a further increase in business confidence, increasing from 9.3 to 13 over the last quarter.

The Index is an analysis of the views of financial decision makers in companies with a turnover of $10m – $100m, measuring their outlook on business conditions, investment plans, business challenges, projected revenue and how prepared they are to navigate volatile conditions for the six months ahead.

From an industry perspective, the Index highlighted:

  • Export oriented industries including Mining, Agriculture and Health & Education have experienced the largest increases in confidence.
  • Transport and Logistics remains the most positive industry, while the Retail sector continues to improve.
  • Businesses in the higher end of the mid-market business segment have risen in confidence however companies making between $10m – $19m have become more pessimistic as concerns over potential cost increases weigh on their minds.

Michael Blythe, Commonwealth Bank’s Chief Economist, said that the latest Index results highlight a cautious confidence within the Australian mid-market  business segment, as companies look to maximise growth in an environment that still provides many business challenges.

“These latest results for the mid-market are a promising sign for 2013. However, despite the positive findings, we need to remember that there are still plenty within the mid-market doing it tough,” said Mr Blythe.

Despite rising confidence in the previous Index, the mid-market business segment largely remained focussed on cost-saving initiatives while minimising growth plans. In the current Index however, this trend has reversed, with the majority of the mid-market that is experiencing confidence looking to take advantage of the market climate by making greater investments in growth initiatives.
Mark Toon, Commonwealth Bank’s General Manager of Corporate Financial Services in Queensland, said that confidence continues to vary greatly from state-to-state.
“While confidence has risen overall, it is interesting to note that business confidence across Queensland, South Australia and the Northern Territory, as well as Victoria and Tasmania, has actually fallen, proving that the mid-market still faces challenges.”
At a state level, the picture is mixed:

  • Western Australia has bounced back from being the most pessimistic state in the previous Index to currently being the most optimistic, driven in part by improving conditions for the Mining sector.
  • New South Wales and the Australian Capital Territory have bucked the previous trend of declining confidence over the past three Indexes to experience a significant increase in business confidence with a greater appetite for risk and capital expenditure.
  • Victoria and Tasmania, Queensland, South Australia and the Northern Territory have all seen declines in business confidence with higher operating and salary costs affecting their outlook.

Looking ahead to the next six months, almost half of mid-market companies claim to be well prepared for future business conditions. Despite this, the Index has reported a drop across a number of core risk measurement indicators including a fall in well controlled cost management plans, well defined business strategies, well prepared risk management plans and detailed forecasts.

“There’s no doubt that there are indications of optimism and growth within Australia’s mid-market business segment, however, the results are not consistent across industries and states and there’s been a drop in planning and risk preparedness.  We hope that that the initiatives executed across the business mid-market are successful and produce even stronger results for our next Index,” added Mr Toon.

KEY FINDINGS FROM THE INDEX

  • Transport & Logistics, Health & Education, Retail and Agriculture are the most confident sectors.
  • Export-oriented industries have become significantly more optimistic, with Mining, Agriculture and Health & Education experiencing the largest increases in confidence over the quarter.
  • Business Services, Wholesale Trade and Information, Media and Telecommunications are among those industry sectors which experienced a decrease in confidence.
  •  Western Australia has risen from least confident to most confident state while NSW & ACT have also risen in confidence.
  • QLD, SA & NT, VIC & TAS have all seen a decrease in business confidence, with operating and salary costs affecting their outlook.
  • Business conditions continue to improve with 38% of mid-market businesses now anticipating better conditions for the next six months (up from 31%).
  • Rising energy costs and are the most significant domestic factors of concern.
  • Economic slowdown in Asia remains the key international factor of concern however international concerns have decreased overall.
  • Transport and Logistics businesses remain the most confident in dealing with future business conditions.
  • 7 out of 11 sectors now emphasise growth over costs, especially firms in the Mining, Business Services and Information, Media & Telecommunications sectors.
  • Construction, Agriculture and Health & Education remain focused primarily on cost cutting.
  • Domestic demand is still seen as the biggest driver of growth within the mid-market business segment, however this has fallen slightly.


– ENDS –

Kathryn Powditch
Commonwealth Bank
(02) 9303 1353
kathryn.powditch@cba.com.au


About the Future Business Index
The Commonwealth Bank Future Business Index is based on a detailed quantitative survey of 436 financial decision-makers in public and private companies throughout Australia with turnover between $10 to $100 million. Conducted by ACA Research, the Future Business Index is an indicator of what the business landscape will look like over the next six months, based on business confidence, predicted future activity and an organisation’s ability to manage fluctuating business conditions. The survey sample includes businesses from a range of sectors including Retail, Business Services, Construction, Health & Education, Information Media & Telecommunications, Manufacturing, Mining, Transport & Logistics and Wholesale Trade. The data has been weighted to reflect the latest Australian Bureau of Statistics Business counts.

The Index seeks to identify:

  • The level of confidence in business conditions over the next six months
  • The challenges and threats businesses face over the next six months
  • How prepared businesses are to navigate volatile conditions
  • The use of financial facilities and risk planning
  • Expected sources of growth and opportunities.

How the Index is calculated
The Commonwealth Bank Future Business Index has been calculated by taking a net balance of future business conditions, net revenue and risk as indicated by businesses with an annual turnover of $10 to $100 million.

  • Net Business Conditions is a net balance of those that indicated that business conditions will improve minus those who predict business conditions will decline.
  • Net Revenue is calculated by taking those companies that see an increase in revenue over the next six months minus those that foresee a decline.
  • Net Well Preparedness is a net balance of those that are ‘well prepared’ minus those that are ‘somewhat’ and ‘not well prepared’.


About ACA Research
ACA Research is a full-service market research consultancy, with particular expertise in customised business-to-business thought leadership, executive research and syndicated multi-client studies throughout Australia, New Zealand and Asia. Through a high level of business and research experience, industry expertise and focus on high-quality outputs, ACA Research effectively supports business thought leaders in their decision-making activities.


Media contact:

Kathryn Powditch
Commonwealth Bank
(02) 9303 1353


Download:

the Commonwealth Bank Future Business Index