Australia business outlook remains optimistic; profit, pricing expectations lift

The Australian economy is into its eighth year of economic expansion and while business confidence is well off its peak, survey indicators are still pointing to solid growth. Firms are optimistic about their own businesses, and still, want to hire and invest. Readings remain elevated.

A net 11 percent of businesses are optimistic about the year ahead. That is unchanged from March and “average”. The sentiment was down in retailing and manufacturing but up in agriculture, construction and the service sector. While headline confidence is “average”, there are few wrinkles across the broader survey; other indicators remain elevated.

A net 38 percent of businesses expect better times for their own business – this indicator tracks growth more closely than headline confidence does. This series has a long-run average of +28. The sentiment is fairly consistent across sectors: the service sector is top at +43 while retailing lags, but is at a more than respectable +29.

Further, investment intentions lifted from +21 to +24 (average 13). Employment intentions remain strong. A net +22 (average 9) of firms are looking at hiring more staff, down 1 point. All sectors bar agriculture are expecting to lift employment.

Profit expectations lifted from +23 to +26 (average 10), led by increases for the construction and retail sectors. Export intentions eased from +30 to +24, undoing much of March’s rise. Residential construction intentions lifted from +25 to +33. Commercial construction intentions rose to +35 from +23.

Firms’ pricing intentions lifted from +23 to +29. Inflation expectations were unchanged at 1.8 percent. A net 30 percent of businesses expect it to be tougher to get credit in 12 months’ time. It’s universal across all sectors but led particularly by agriculture.