Australia

Details

  • Service: Private Enterprise, Private Companies
  • Type: Press release
  • Date: 31/07/2012

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Slowdown of economy worrying Australia's Private Companies: KPMG survey 

31 July 2012 - Australia's private companies are becoming more nervous about the future and believe Australia has entered a downward curve in the economic cycle, according to KPMG’s annual Private Companies Survey.
  • Around a third experienced a fall in both revenue and profit over the previous 12 months.
  • 88 percent have forecasted revenue growth for 2012-13.
  • Forty-four percent are experiencing skills shortages, down from 55 percent in 2011.
  • Relaxed about the digital economy, but 65 percent do have plans to introduce new digital communication channels this year.

 

Australia's private companies are becoming more nervous about the future and believe Australia has entered a downward curve in the economic cycle, according to KPMG’s annual Private Companies Survey.

 

The survey of 546 respondents, conducted in April and May 2012, shows that 46 percent of private companies feel that short-term business prospects are poor or very poor, compared to 24 percent in 2011.

 

Commenting on the survey, Peter Siebels, Head of KPMG’s Private Enterprise practice says that the decline in sentiment and increased focus on costs are the major messages to emerge.

 

"There is a sharp deterioration in sentiment from our two previous surveys, similar to what we saw in 2008 when the international banking crisis was unfolding. Gloomy news from Europe and domestic factors, like the consequences of a high Australian dollar for our manufacturing, tourism and some areas of agriculture, are the major influences," he said.

 

"It’s a tough environment. Housing prices have continued to slide, construction approvals are soft and retail spending remains flat. It is no surprise that around a third of respondents experienced an absolute fall in both revenue and profit over the previous 12 months and about 44 percent of companies failed to meet revenue targets for their most recent 12 month period," he said.

 

When asked about the key challenges facing their businesses over the coming 12 months, businesses Australia-wide feel that continuing global uncertainty, impaired consumer confidence and skill shortages will be their main obstacles to growth. The survey reinforces the notion of a multi-speed economy with great variation in the economic performance and perceived business challenges by each State.

 

"Adverse trends are less obvious in the resource-rich states and territories. Skill shortages continue to be the biggest challenge to businesses in Western Australia with 31 percent of respondents listing that as their major concern and in the Northern Territory that jumped to 40 percent. Those in Queensland are more concerned with continuing global uncertainty. In New South Wales, South Australia, Victoria and Tasmania respondents are more concerned about consumer confidence," explained Mr Siebels.

 

Private companies are scaling back their growth plans in the face of these challenges and the major change drivers include the economic environment, changing customer behaviour and government policy initiatives.

 

"Companies will trim capital spending budgets with only 45 percent intending to undertake major investments over the next 12 months, a significant reduction from the 2011 results. In response to these current challenges, the highest priorities for businesses across the country are customer satisfaction, overhead management and alternative or additional revenue opportunities," said Mr Siebels.

 

Survey respondents appear to be relaxed about the digital economy with 71 percent of respondents saying they do not believe online business models will fundamentally change the way they do business over the next 12 months and under half of the respondents experienced an increase in online transactions over the past 12 months.

 

"There are many opportunities that arise from the digital economy, yet many private companies are still not embracing it with gusto. Only 34 percent of respondents are currently using social media in their marketing mix, with Facebook continuing to be the most popular medium. On the positive side, 65 percent of businesses say they do have plans to introduce new digital communication channels to engage with customers over the next 12 months and out of these businesses, nearly a third will be enhancing their websites.  Businesses should be considering their strategic direction for the next few years and ensuring their website is enhanced to align with their business model," he said.

 

Despite the current economic and regulatory environment continuing to challenge Australian private companies, 87 percent of respondents say they are moderately or well prepared to meet the challenges ahead.

 

"Our survey results challenge the simplistic notion that Australia possesses a ‘teflon’ economy that is the envy of the world. I would say it has more to do with the way in which private business owners and managers are running their enterprises which allows them to be more adaptable and nimble. There is no denying the challenges, but there is also a measure of confidence coming through the responses with many businesses still investing, still employing and still trying to innovate and change," added Mr Siebels.

 

Media enquiries

Kristin Silva

Head of Public Affairs

KPMG in Australia

+61 2 9335 8562, 0411 110 953

ksilva@kpmg.com.au

Avilyn Tan

Communications Manager

KPMG in Australia

+ 61 3 8626 0943, 0428 435 095

avilyntan@kpmg.com.au