Bleak forecast for Qld economy

PROPERTY News

The Queensland economy continued to slow during the 2010 December quarter, as businesses were buffeted by tightened consumer spending and rising business costs, according to the latest Commonwealth Bank CCIQ Pulse Survey of Business Conditions.

The survey showed that businesses expect the state’s economy to further weaken over the coming months, with the Pulse Index falling by 11.8 basis points to 39.8 basis points. Confidence in the Australian economy has also fallen another 8.5 basis points to 49.3 points since the previous September Quarter, and is down 16 basis points from its December 2009 high of 65.3 points.
CCIQ president David Goodwin said that while the recent floods were anticipated to impact business conditions, weakening profits were already being experienced over the last quarter of 2010.
“Business profitability suffered another blow during the December Quarter, tumbling 4.9 basis points to 37.5 points, which is the lowest since September 2008. “While the floods in Queensland and interstate have certainly impacted our state and national economies, 49 per cent of businesses experienced weaker profitability over the last quarter of 2010, and the majority of businesses expect further depressed profits in the first quarter of 2011.
“This means that businesses are starting to make some tough decisions to reduce costs including scaling back operations, reducing wages, and cutting jobs. “The flow-on effects of the recent flood disaster will only intensify the existing pressure on our economy, and the government must do more to support businesses during this difficult time over the next six to 12 months,” he said.
According to Queensland business owners, a number of underlying issues threatened their viability in the final quarter of 2010. Wage pressures continued to increase. Government charges and rising utility costs also forced consumers to reduce their spending, causing a decline in business activity and investment across the state.
Commonwealth Bank General Manager Corporate Financial Services Queensland, Mark Toon said that existing conditions had also been compounded by global economic conditions and instability in the Queensland property market.
“It’s clear that businesses have been having a tough time and unfortunately the recent floods have exacerbated the situation,” Mr Toon said. “Among a variety of factors, respondents revealed that capital expenditure has continued its less than favourable trend and it seems that there is little change expected looking forwards to the March quarter 2011.
“Although it’s likely that construction activity and investment in plant and equipment will be boosted as a result of rebuilding activity, businesses will require ongoing support in order to help along the overall recovery process.”

• Some 683 businesses completed the Commonwealth Bank CCIQ Pulse Survey of Business Confidence, which the bank says is the most comprehensive survey of Queensland business.