​Business confidence up, finance industry remains cautious

by Amy Rosenfeld29 Jan 2014
Overall business confidence saw a sharp increase in the last quarter, while businesses in finance and insurance remain wary.

According to CBA’s latest Future Business Index confidence reached the highest level since the survey began in September 2011, with a reading of 17 in the December quarter, up from 10.8 in the September quarter.

Michael Cant, CBA’s executive general manager corporate financial services, says there has been a marked improvement in confidence across the mid-market and the vast majority of businesses are anticipating a more prosperous year ahead.

 “Optimism across all businesses is being driven by a number of factors, most notably stronger revenue and profit expectations,” said Cant.

“Notwithstanding the buoyant sentiment across the mid-market, there remains a level of conservatism as businesses continue to focus on managing costs.”

A reasonable proportion of these conservative businesses operate in the finance and insurance sector, with many finance organisations looking to reduce headcount and capital spending.

Overall, business confidence in the sector is down 7%.

More than 40% anticipate higher operating costs potentially limiting profit growth. While 61% expect higher revenues, only 40% say profits will increase.

The proportion of firms concerned over the falling Australian dollar has plummeted from 51% inSeptember to 15% this quarter. A potential economic slump in Asia, however, is still a concern for 51%.

Despite this, 72% are confident 2014 will bring improved business condition and, compared with the previous quarter, twice as many firms expect domestic demand to drive growth.

CBA chief economist Michael Blythe said the index revealed the top three domestic challenges facing mid-market businesses in the next year are weak consumer confidence, a falling Australian dollar and uncertainty about government policy decisions.

“The sharp improvement in revenue and profit expectations is quite encouraging and we’re seeing this improved sentiment flow through to other important areas, such as an enhanced appetite for risk and an expected increase in capital expenditure and .”

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