Australian businesses say they're thinking about investing at the highest levels in two years

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As the economy transitions away from the capital intensive mining sector, one of Australia’s big economic challenges has been dwindling capital expenditure and uncertainty about investment levels.

Maybe – just maybe – there’s some hope on the investment front.

Dun & Bradstreet’s Australian Business Expectations Survey (ABES) for Q2 2017 adds to the recent flow of positive data highlighted by last week’s bumper GDP numbers for the December quarter.

Sales and profit expectations both lifted in the latest survey, but there was surprise increase in expected levels of capital investment, which reached a two-year high.

Dun & Bradstreet

At 13.7 points, the index is at its highest point since August 2015.

Stephen Koukoulas, D&B economics advisor, said the rise in capital investment was “at odds with the recent Australian Bureau of Statistics data on business investment which showed further weakness, business expectations for capital expenditure have risen solidly over the last two quarters which could be signaling a turning point for this important part of the economy.”

Dun & Bradstreet’s Business Expectations Index (BEI) rose to 20.5 points, an improvement of 61.4% from the survey conducted at the same time last year. The BEI is an average of the survey’s measures of Sales, Profits, Employment and Capital Investment Expectations.

Dun & Bradstreet Business Expectations Survey

The latest ABES from Dun & Bradstreet supports the findings of National Australia Bank’s Business Survey for January 2017, in which the businesses surveyed reported their strongest operating conditions since October 2007.

Perhaps not surprisingly, given Australia’s anemic wage growth, the Employment Expectations Index fell to 11.2 from 14.6 points but is still up from 8.3 points a year ago.

The ABES also highlights that 41.5% of businesses surveyed identified consumer confidence as the issue most likely to affect business operations in the next quarter, along with cash flow (18.2%) and interest rates (8.2%).

The Wholesale sector had the highest BEI score of all sectors at 30.5 points. Wholesaler businesses are particularly optimistic for sales expectations in the June 2017 quarter, recording an index score of 50.6 points.

“Overall, the BEX survey confirms that firms have a generally positive view for the economy. The critical issue will be whether this optimism translates to a lift in actual activity,” Mr Koukoulas said.

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