By Chris Zappone
A quarterly gauge of business confidence has fallen to an all-time low as companies hunker down for a year ahead of weak profits and faltering growth.
Companies' confidence dropped to minus-31 index points in the three months to December, the lowest level since the data series began in 1989, according to the National Australia Bank's quarterly survey.
That compares with the September quarter's contraction to minus-7 index points and brings to a full year quarterly readings in negative territory.
The index has now been in negative territory since January last year, reflecting a growing fear businesses in Australia won't escape the effects of the global downturn underway.
"While the readings for business conditions and confidence are somewhat dated given the impact of the Government's fiscal package in December, the bottom line remains that the full quarterly survey readings are not that much different from that reported in the January survey released earlier this week,'' said NAB group chief economist Alan Oster.
Companies' confidence in the monthly survey - reported on Tuesday - dropped to minus-32 index points last month, a new low for the 12-year history of the survey
The results of the monthly survey took into account the Federal Government's $10.4 billion stimulus packaged announced in October, as well as 3 percentage points of cuts to the interest rate by December. The RBA has since lopped another off another full percentage point this month, bringing it to 3.25%.
"Business is clearly positioning itself for tough times ahead,'' said Mr Oster, speaking of today's reading. "That is particularly evident in employment - where labour shedding has been evident in the survey for some time.''
Today, the ABS published employment data for January. While total employment grew, the jobless rate ticked up 0.3 percentage points to 4.8%, its highest level since the first half of 2006.
Companies have grown pessimistic about the year ahead, with expectations for business conditions in the next 12 months dropping 35 index points to a new low of minus-21 points, NAB said.
Capital spending plans have also shrivelled in the face of plummeting local and global demand. The forecast for future investments by companies in their business skidded 28 index points to minus-15, also a record low.
"In response to questions as to why activity has fallen so fast business is clearly indicating that slower demand and falling customer confidence,'' said NAB.
The Reserve Bank last week said it expects the economy to grow by only 0.25% for the year to June 30, before nudging up to 0.5% by the end of 2009, as the weak consumer demand and a lowered appetite for Australian resources saps the economy.
Also contained in NAB's survey, a reading of overall business conditions tumbled to the lowest level since 1992, when the nation was struggling through a recession.
Business conditions dropped 12 index points to minus-16 points in the three months to December, according to NAB, led lower by a drop in employment conditions. A gauge of jobs collapsed 18 points in the quarter to minus-16 points, the survey said, as fewer companies said they were having trouble finding staff.
"Thus, the proportion of respondents experiencing serious difficulties in attracting suitable labour has fallen from 23% to only 11% - the lowest reading since June 2003,'' the report said.
"That is very much consistent with a weakening labour market and an economy running at much lower levels of capacity utilisation.''