How inclined are businesses to spend on new equipment?
- September 11, 2015
- Posted by: Admin
- Category: Services
The business landscape has been far from smooth throughout the course of 2015 so far, with economic challenges ranging from low interest rates to the depreciation of the Australian dollar taking their toll.
However, as the country enters the final third of the year, has there been any let-up in confidence? Several key indicators are important for tracking this trend – and they paint a mixed picture.
Why confidence matters
Business confidence is an important aspect of any developed economy. It gives companies the positive outlook required to invest in their operations, potentially leading to increased interest in products ranging from bin level indicators to density gauges.
Of course, spending is critical to the overall success of the economy. The latest figures from the Australian Bureau of Statistics (ABS) reveal that between the June quarters of 2014 and 2015, there was a 2.8 per cent seasonally-adjusted rise in expenditure on plant equipment and machinery.
This is a significant amount of money for the Australian economy to be losing out on, so the ramifications of poor business confidence may be more widely felt than first anticipated.
So how is confidence faring?
The Roy Morgan Research Business Confidence Index shows it's the economic outlook that tends to have the biggest bearing on sentiment. During the 12 months to July, confidence levels have declined 6.8 points on the index, which is largely a result of how companies perceive the future of Australia as a whole.
Nevertheless, there were some areas of positivity. As the ABS figures show, firms are not averse to the idea of spending at the moment, which bodes well for the future sales of metal detectors and primary sampling units, among other equipment.
Roy Morgan found that 57 per cent of businesses believe the next 12 months would be a good time to invest in growing their operations. This result is therefore slightly above than the five-year average of 56 per cent.
Companies were also shown to be optimistic about their own financial position, which once again tallies with the fact that they're more willing to spend.
Business spending at a glance
Although the ABS points towards a rise in spending on equipment, this might not be the only area the nation's companies are forking out on. The latest Commonwealth Bank Business Sales Indicator (BSI) pointed to a strong increase in spending across the economy as a whole throughout July.
The results may be positive, but Executive General Manager of Local Business Banking at Commonwealth Bank Claire Roberts doesn't believe there is any room for complacency.
She commented: "As the rate of growth is beginning to slow and consumer confidence is measured, it's an important time for businesses to ensure they have strategies in place to manage any further fluctuations over the coming months."
It appears this positivity is evenly spread across most of the nation, as the BSI noted a rise in sales in all states and territories with the exception of the Northern Territory. The ACT witnessed the strongest sales growth at 1 per cent, while the smallest increase was registered in Victoria (0.3 per cent).
Roy Morgan indicated that various different sectors are proving crucial to the success of the economy as a whole. Mining needs support moving forward and it will be the duty of other industries such as agriculture and manufacturing to ensure this is the case.
It seems that 2015 is coming to a close just as it started, with mixed signals and no real indication of what might be around the corner. Businesses are keen to expand and invest, but it may ultimately be conditions in the wider economy that gives them the green light to do so.