After a difficult start to 2015, business conditions and confidence have improved according to the 2,647 businesses who participated in Australian Chamber Businesses Expectations Survey for the September Quarter of 2015.
Sentiment about overall business conditions rose 1.5 points to 44.1, while expectations for the Australian economy in the coming year rose 0.6 points to 43.5. This represents the first improvement in reported business conditions in 12 months, and the first improvement in expectations for the economy in almost two years. Nevertheless, the balance of sentiment remains negative, with both indicators sitting well below the neutral 50 reading.
Performance has improved alongside sentiment. Sales revenue rose 0.8 points to 50.2, returning to essentially the same reading recorded in September 2014. Profits jumped 1.1 points, but remain deep in negative territory at 42.7, despite having risen 6 points over the last two years.
With performance improving, businesses are showing signs of employing and investing. After falling in the first half of 2015, employment rose 0.4 points to 46.8 despite. Investment indicators grew strongly for the second consecutive quarter, with Investment in Buildings and Structures rising 2.5 points to 45.3 and Investment in Plant and Equipment rising 0.5 points to an almost neutral reading of 49.0.
However, improving conditions may be reviving wage pressures. The wage costs indicator increased for the third consecutive quarter and is now around its five year average at 61.3, while the non-wage labour costs is now at 63, which is reaching back to its post-GFC peak.
Kate Carnell AO, CEO of the Australian Chamber, said: “After a difficult start to 2015, business conditions and confidence are improving, but the majority of indicators are still in negative territory and we’ll need a sustained recovery to bring them out.
“We are starting to see the “Turnbull effect” filter through to business confidence, but what businesses really want to see is progress on the important problems facing Australia.
“The challenge for the Turnbull Government will be to deliver the change that business needs. To boost growth we need to see a more efficient tax system, a more flexible set of workplace regulations and a better process for selecting and funding important public infrastructure.”
A copy of the ACCI Business Expectations Survey can be found here.