Australian Companies Expect 2010 to Be Difficult
Written on November 30, 2009
Australian companies are cautious and their investment plans show they expect difficult economic conditions to continue in 2010, Treasurer Wayne Swan said today.
Company spending for the fiscal year will probably contract for the first time in nine years, even as sentiment shows some recent gains, Swan said in a weekly newsletter. While federal and state stimulus programs are helping maintain construction jobs and spending, a Nov. 26 report showed private investment in buildings, plant and equipment fell 3.9 percent in the third quarter, he said.
Australia’s government is under mounting opposition pressure to peel back the A$42 billion ($38 billion) stimulus faster as the economy recovers and interest rates rise toward pre-crisis levels. The central bank has increased its benchmark rate twice since October and will probably increase it to 3.75 percent on Dec. 1, according to 18 of 20 economists surveyed by Bloomberg News.
“Things have picked up, rebounded, but they haven’t fully recovered,” Australian Industry Group Chief Executive Officer Heather Ridout said by phone today. “People are very cautious still, even though they are seeing better levels of orders. People still aren’t confident the economy can stand on its own two feet.”
Australia’s economy expanded 1 percent in the first half of the year, aided by a rebound in demand for the nation’s iron ore, coal and natural gas. The Reserve Bank is forecasting growth of 3.25 percent next year and in 2011.
Manufacturing Weak
Still, while mining companies increased investment by 3 percent in the third quarter, manufacturers slashed spending by a record 13.4 percent.
“It’s patchy,” Ridout said. “Those capex figures were a bit of a reminder.”
Business investment intentions remain 7.7 percent lower than the same estimate for 2008-09 and imply a contraction in spending for the 2009-10 year, Swan said.
Those “numbers underscore the continued importance of our infrastructure stimulus, which is working to support investment in our economy and activity and jobs,” he said. Next year presents challenges that “will be just as difficult as the ones we have faced over the past year,” he said.
Filed in: legal.