Australian medium-sized businesses are the most confident business sector about their prospects for growth, despite the uncertain economic environment, according to the latest GE Capital Mid-Market CFO sentiment survey released today.
Australian medium-sized businesses are the most confident business sector about their prospects for growth, despite the uncertain economic environment, according to the latest GE Capital Mid-Market CFO sentiment survey released today.
"The Mid-Market continues to be a driving force in the Australian economy, showing greater optimism than both small and large business," said Aaron Baxter, Head of Commercial Finance, GE Capital.
Conditions for Mid-Market businesses have continued to decline steadily over the past 12 months and Chief Financial Officers (CFOs) have growing concerns about their current outlook. However, in the face of adversity the sector remains resilient, with a large number of businesses remaining optimistic about future growth prospects.
"The key issue over the next 12 months will be whether this optimism will convert to business recovery or if we will see a prolonged downturn. It's clear this optimism could be short lived if the current economic conditions remain tough.
"The Mid-Market -- businesses with annual revenues of between $10 million and $250 million - remains the engine room of the economy, contributing over $425 billion a year to the economy and providing 1 in 4 full-time jobs. A recovery is important not just for businesses within the sector but the Australian economy as a whole."
The GE Capital report, entitled Inside the Mid-Market; innovation at work, tracks more than 5,000 CFOs across Mid-Market industries including construction, retail trade, manufacturing, business and property, transport and storage, wholesale trade, and other industries.
The economic environment was the greatest challenge, with over 42% of Mid-Market CFOs identifying it as one of their top three concerns. Issues such as finding and attracting talent have become less of a priority, while businesses focus on dealing with the impact of barriers to growth, such as the economic environment and government regulation. Managing costs and cash flow have also become higher priorities than they were last year.
The findings show those Mid-Market CFOs who intend to increase their capital resourcing are looking for assistance with low-cost access to finance, reduced government regulation and tax incentives on technology upgrades.
The Index also reveals market differences in business growth outlook between industries and states, pointing to the impact of the multi-speed economy.
Growth Outlook -- State analysis
- Western Australia's Mid-Market has the most positive business growth outlook, however it still experienced modest declines in confidence throughout 2012.
- NSW/ACT experienced the smallest levels of decline in business growth outlook over the past year and remains the second most optimistic state. It also experienced the strongest turnaround in confidence in the most recent December 2012 quarter.
- Victorian/Tasmanian Mid-Market organisations have shown continuous declines in outlook for much of 2012. The fact the poorly performing Manufacturing sector is strongly represented in Victoria and the optimistic Retail sector is under-represented has contributed to the decline.
- South Australia/Northern Territory had by far the weakest business growth outlook with steep declines in confidence over the past year. The over-representation of the two worst performing industries, Construction and 'Other Industries', which includes mining, has contributed to the weak outlook for this region.
Growth Outlook -- Industry analysis
Positive outlook:
- Since the June 2012 GE Capital report, three powerhouse industries have emerged within the Mid-Market -- Business and Property, Wholesale and Transport
- The Wholesale trade sector, buoyed by the strong Australian dollar, experienced the most marked increase in business growth outlook throughout 2012, almost doubling in the past 12 months. This sector was the hardest hit in the last Mid-Market report in June 2012, but now shows a longer-term trend toward growth.
- Retail trade continues to show a strong growth outlook, despite a general perception the industry has been struggling. The sector experienced an increase in future expectations for growth in September 2012 and CFOs remain positive about what lies ahead.
- Business & Property continues to outperform the rest of the sector and is showing clear signs of recovery. It saw the largest improvement in outlook of any industry between September and December 2012.
- Transport has experienced a strong growth in optimism, and is the second most positive industry sector about its outlook for growth. There has been a large rise in expected staff growth over the past year, with more Transport and Storage CFO's expecting growth in this area than any other industry.
Doing it tough -- uncertainty remains...
- The Other Industries sector (including mining, finance and insurance, education, health, accommodation and food services) previously among the strongest performing sectors due to the inclusion of Mid-Market mining businesses, has been hit badly by falling resource prices and declines in service industries.
- Despite a brief increase in June 2012, Manufacturing continues to struggle with a low outlook for growth over the next 12 months.
Louisa Walsh
GE Capital Australia and New Zealand
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