Australia's Big Businesses Are Pulling Ahead With Unsustainable Discounting Strategies: NAB

The gap in business conditions for Australia’s largest companies versus the broader economy is the widest it has been since 2011, according to NAB’s ASX 300 Business Survey for the June quarter.

The survey pegged business conditions for ASX 300 firms at 2 index points in the June quarter. For the wider economy, NAB pegged business conditions at -8 index points in June.

Both groups were similarly pessimistic, however, with ASX 300 business confidence falling 7 points to -3 in the June quarter, compared with -4 points for the broader economy.

“These larger firms are able to implement strategies in a tough environment that allow them to succeed, and these are strategies that the smaller firms can’t necessarily implement,” NAB economist Gerard Burg said, highlighting efficiency improvements and discounting as examples.

“Strategies like discounting aren’t sustainable in the longer term. That’s particularly the case for smaller businesses who lack the cash reserves to implement this type of strategy.

“Larger firms are really pushing through this strategy at the present time but eventually, cash flow pressures will be a problem for them as well.”

Here’s Burg’s explanation:

NAB’s full report is here.

Now read: Australian Business Conditions Are In The Tank

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