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Published 02 April 2013 07:01, Updated 02 April 2013 07:33
Under Glenn Stevens the RBA has had something of an each-way bet on the Australian economy recently. Photo: Tamara Voninski
As Glenn Stevens and the members of the Reserve Bank board shrug off their post-Easter chocolate comas, it will be well and truly worth their while looking at the latest business expectations survey from Dun & Bradstreet.
The sharemarket might be cruising along and economic data might be relatively healthy, but D&B’s latest report from the front line of business shows managers and owners remain bunkered down.
Profit expectations: down. Sales expectations: down. Employment expectations: down. Capital investment expectations: way down.
Source: Dun & Bradstreet
Indeed, investment expectations fell to their lowest point since September 2011 after remaining well above the 10-year average for the best part of two years.
This reading from the quarterly D&B survey has always been a little mystifying. For a little over a year, each quarter executives and managers have been reasonably bullish about what they expect to spend on capital items, but in the end the proportion who actually do spend is much, much lower than forecast.
It’s almost as if the managers are willing the economy to pick up and their growth plans to get the green light, even if they know it probably won’t happen.
The latest expectations survey for the June quarter shows that just 7 per cent of executives intend to seek credit to grow their business in the quarter ahead.
In addition, just 8 per cent plan to increase their current level of borrowing, while 40 per cent of businesses plan to pay down debt.
These are not stats which suggest that businesses are hunting for growth opportunities, ready to use low interest rates to launch new initiatives. Instead, our businesses are taking advantage of those low rates to deleverage.
A few other insights from the D&B survey underline the fact that business remains under pressure. Nearly 30 per cent of executives see slow growth in the demand for their products as the biggest barrier to growth, while a whopping 50 per cent expect cash flow to be the biggest influence on their operations.
The RBA has managed to have a bit each way in recent post-rate decision statements, keeping rates firmly in easy territory while at the same time focusing on the positive signs from the economy.
But the message isn’t being heard by those actually running businesses. The D&B survey shows us that low rates aren’t sparking their growth plans and their slices of the economy remain fragile.