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Survey suggests election won’t improve business sentiment

Reported by Ryan Newman, The Motley Fool.
Wednesday, September 4, 2013
Topics in this article:
Asx,Bhp Billiton,Rio Tinto,Westfield
Companies forced to change their nameConflict in Iraq and Syria is causing serious headaches for companies who happen to share the ISIS moniker

Many have argued that the economy could experience a positive turnaround based on the outcome of Saturday’s national election, the theory being that businesses are waiting for the results to ‘get on with life’. However, the latest Business Expectations Survey undertaken by credit information bureau Dun & Bradstreet offers another view.

The group believes that neither Saturday’s results nor the fact that interest rates are sitting at an all-time low are likely to stimulate the economy.

D&B said, “Business expectations for the final quarter of the year have fallen flat in a sign that the economy’s long-awaited revival will not occur in 2013… The outlook for the remainder of the year suggests that businesses do not view the conclusion of this month’s federal election as a potential springboard for the economy.”

For instance, after a tough year, many companies will focus on reducing debt, managing core operations and controlling costs instead of expanding or spending unnecessary capital (just as we have seen with mining heavyweights BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) over the last 12 months).

According to the results of the survey, just 11% of businesses expect that an increase in sales will be realised for the fourth quarter, as compared to 18% in the previous quarter, whilst just 2% actually intend on lifting spending – regardless of the outcome of the federal election.

On the other hand, there are promising signs for the manufacturing sector, which should benefit from the falling Australian dollar. Although the RBA kept interest rates on hold on Tuesday, it expects that the Australian dollar will continue to fall, which would likely increase the profitability of exporters.

Foolish takeaway

Whilst the survey has revealed that a more stabilized government would not necessarily boost business’ spending, it could have a positive effect on consumer sentiment. Commsec chief economist Craig James believes that consumer and household spending could be boosted based on the outcome of the election, which should, in turn, boost business confidence.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

23/11/2014 18:12Sydney, Australia. 23 November,2014
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