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Conditions soften for mid-sized businesses

Reported by AAP
Wednesday, October 17, 2012
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Business conditions remained positive in September but softer than six months earlier, a survey of mid-sized firms has found.

The survey by Commonwealth Bank showed mid-sized firms, those with annual revenues between $10 million and $100 million, were less likely to expect an improvement in business conditions compared with the previous survey in March.

In the September survey, the net balance - the percentage of optimists minus the percentage of pessimists in the survey - had fallen from plus 10 six months earlier to only plus one.

The most dramatic fall was in construction, where the net balance switched to minus eight from plus 23, although other sectors - reflecting the so-called patchwork economy - headed the other way.

Mining went to plus 13 from plus seven, while health and education improved to plus 13 from plus four.

Perhaps most surprisingly, the retail sector also posted an improvement in expectations for business conditions, rising to plus eight from minus nine.

The bank's chief economist, Michael Blythe, said this could be related to several factors, including the recent interest rate cuts and income boosts related to the carbon tax compensation measures.

"The indications that economic policy still works is an encouraging sign for domestic economic prospects in the uncertain global environment," he said in a commentary on the survey results.

The survey also produces an indicator called the future business index.

It combines three measures - expectations for net business conditions, expectations for revenue, and the balance of businesses seeing themselves as well prepared to cope with challenges.

This combined index fell to plus 4.3 in September from plus 9.3 in March, almost entirely because of the decline in optimism over business conditions.

Despite the fall, the index was still higher than a year ago, when it stood at minus 0.3.

In a trend Mr Blythe said might reflect a "rebalancing" of the economy away from mining, the future business index was strongest in NSW and the ACT, where it was plus 10.4 and in Victoria and Tasmania, where it was plus 6.2.

The weakest region according to this measure was SA and the Northern Territory, at minus 10.1.

But the mining boom state of WA also went into the red, at minus 2.0, from plus 14.7 six months before.

Commonwealth Bank's executive general manager of corporate financial services, Symon Brewis-Weston, said the drop in confidence in WA was the result of "concerns about increased competition from overseas and fears about slowing demand from China".

31/10/2014 01:24Sydney, Australia. 31 October,2014
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