ECONOMIC CONFIDENCE BUT NOT ENOUGH TO SPEND

Written on the 9 April 2015

ECONOMIC CONFIDENCE BUT NOT ENOUGH TO SPEND

LARGE Australian companies are quietly confident ahead of the Federal Budget next month, according to research from American Express.

The American Express CFO Research Global Business and Spending Monitor surveyed a number of chief financial officers from companies with revenues of more than US$500 million.

The findings show CFOs anticipate strong revenues, export expansion and that the economy will contribute positively to company growth.

However despite the promising outlook, CFOs report a 20 per cent year-on-year decline in plans for aggressive investment for 2015.

Australia was the second most reluctant market in the Asia Pacific region to aggressively invest this year, behind Hong Kong.

American Express Global Corporate Payments vice president Christine Wakefield says although some companies have loosened the purse strings, spending intentions appear cautious in the next year.

"Half of Australian CFOs say their level of investment over the next 12 months will stay flat or increase by less than 10 per cent and an additional three per cent say their investment will decrease," Wakefield says.

"At a time when the government is looking to big business to help drive the economy forward, this research shows more needs to be done to give CFOs the confidence to spend."

Between 32 and 42 per cent of CFOs were not swayed to increase investment expenditure for improved market capitalisation, to remain competitive, business innovation or better meeting customer needs.

Fundamental activities they would continue to invest in include improving efficiency, product development and marketing.

Three quarters of respondents listed up skilling employees as a key area of focus, rather than recruitment.

"Companies are looking for ways to do more with less and stretch every dollar further," Wakefield says.

"Yet with competition increasing and innovation needed to drive organisations into the future, it's vital Australian big business doesn't pull back excessively and forgo long-term returns.

"With our dollar performing weakly against the US dollar, now especially is a great time for exporters."


KEY FINDINGS


- 60 per cent predict economic expansion over the next 12 months.

- CFOs are confident of increased sales, particularly in Asia and New Zealand.

- 68 per cent say their spending will be moderate and 10 per cent say it will be aggressive.

- 32 per cent say the cost of labour will negatively impact Australian employment.

- The majority of companies are looking to expand activities in China, including distribution, production and outsourcing.


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