With a tough economy, weakening dollar and lower consumer spending, Australian businesses are finding the going tough. Business confidence fell to a record low in October, according to a National Australia Bank survey. The bank's confidence index fell to minus 29, down 21 points from September, its lowest reading in the survey's 19-year history. So it is not a surprise to see the S&P/ASX Index of stocks down 2% today, extending this year's decline to 38%. Similarly the Australian dollar has plunged 32% since reaching a 25-year high of 98.49 cents on July 16 (US dollar parity is now a pipe dream). With one in four businesses finding it harder to borrow, expansion and hiring plans are also on hold for a number of companies.
"Fear reigns supreme,'' said Alan Oster, chief economist at National Australia in Melbourne (via Bloomberg) "Continuing volatility in global equity markets, emergency financial packages, falling commodity prices and continuing talk of a global recession have finally broken business optimism. Most concerning is a drop in forward [manufacturing and retail] orders to near recessionary levels."
This story is similar all over the world as the global recession spreads. Talking to business owners back in Australia, there is a definitely a sense of apprehension in getting through these tough times and no doubt some won't make it through. However the ones that do will be much stronger and be able reap the benefits of lower competition when the economy starts to improve.
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