Business expects higher profit return in 2010

Business anticipates higher profit returns in 2010 and reports of a return to fierce labour competition, according to latest survey

February 11, 2010

Businesses are expecting higher profit returns as well as fierce competition for labour this year, according to the latest expectations survey from Dunn and Bradstreet.

According to the findings, firms across the nation are reporting their strongest expectations in many years for inventory and growth.

But there are still concerns about credit market conditions, interest rates and rising petrol prices which businesses fear could hinder their rise out of the global financial downturn.

The report also shows actual growth from recent quarters and predicts a return to positive times for businesses throughout Australia.

"Despite reports of recent falls in job advertisement numbers, all sectors now have positive expectations for growth in employment numbers," the report says.

"Employment expectations for June quarter 2010 are five percentage points higher than the March quarter of 2010 reaching an index of 5.

"Eleven percent of firms are planning to increase staff levels and six percent to reduce employee numbers, a 31 percent improvement on the June quarter 2009."

The report also says outlooks for profit expectations have continued to improve, with the index of 15 points for the June quarter expected to be the highest in five years.

"Twenty seven percent of Australian executives surveyed now anticipate profits will increase in the June quarter and only 12 percent expect a fall," the report says.

All of these predictions appear to have come on the back of actual capital investment in the December quarter of 2009 being the highest in more than six years.

D&B economic consultant Duncan Ironmonger expects 2010 to be a positive year for growth in Australia.

"2009 is highly likely to show four quarters of positive economic growth in Australia - a strong base for more growth in 2010," Ironmonger says.

The survey found 23 percent of executives believe fuel prices will be the primary influence of operations in the quarter ahead, a rise of 10 percent on the previous month’s survey.

Last weeks decision to leave interest rates on hold also made some of the smaller companies slightly jittery, according to Ironmonger.

"Last week's Reserve Bank's (RB) decision to leave official rates unchanged indicates some concern for the difficult credit conditions that remain for many small businesses," he says.

Ironmonger says companies should instead look at the RBA’s decision as a confident sign from the bank is comfortable with the current outlook for inflation.

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