Global recovery in reverse, say accountants
Poor access to finance and slow demand most common problems facing Australian business, survey shows.
The fragile global recovery has gone into reverse in the last three months, with investment and business confidence suffering a serious setback, according to the latest survey of finance professionals by ACCA (the Association of Chartered Certified Accountants).
Nearly half (49%) of the 1,895 professional accountants surveyed by ACCA believe that conditions are stagnating or deteriorating, and for the first time in the survey’s two years, ACCA’s key economic and business confidence indicators have not pointed towards improving conditions.
Crucially, the report says, the outlook for new orders has weakened in the last three months and more respondents are now reporting concerns about whether their suppliers can continue to be viable. Inflation continued to rise in the last quarter, with 35% of respondents seeing an increase in their operating costs, while slightly more accountants reported that their firms and clients could not get vital finance from banks and other lenders than three months ago.
While ACCA has warned that it is too early to tell whether any particular economies are about to suffer a renewed downturn, it expects that the next quarter’s figures will show whether we are dealing with a temporary ‘pause for breath’ or something much more dangerous. The probability of the latter is reinforced by a sharp deterioration in the survey’s investment indices. ACCA believes that governments’ gradual withdrawal of support for investment over the past nine months is now beginning to tell as demand and financing conditions weaken once again.
Accountants based in Western Europe believe that their governments will reduce spending substantially over the next five years, and those in the Americas are slowly coming to anticipate some measure of austerity as well. On the other hand, ACCA members in Africa and Asia expect public spending to rise substantially. Of those, members in the Asia Pacific region are much more confident that their governments can afford increased levels of spending, while those based in South Asia and Africa expect a tough balancing act ahead.
The picture in Australia
Respondents in Australia had generally revised their expectations of global economic recovery downwards in the last three months, although more than half (53%) still believed that the recovery is imminent or underway. Respondents’ confidence in the prospects of their organisations remained constant despite trends elsewhere in the Asia-Pacific region, with 27% reporting gains and an equal number reporting losses while many more (46%) reported no change. Rather, poor access to finance and sluggish demand, each cited by 35% of respondents, appear to be the most common problems for business.
As a result of these more moderate recovery trends, Australia has not to date suffered from the kind of inflation that afflicts other economies in the region – only about a quarter (25%) of respondents reported such problems for their organisations or clients. And there is more good news as business insolvencies and staff cuts appear to be becoming much rarer. Australia was the only major ACCA market in which innovation emerged as one of the most common types of business opportunity cited by respondents (18%). It has comfortably led the rest of the region in this regard. Other commonly cited opportunities typically involve cost-cutting (22%), improved quality (18%) and stronger supply chain relationships (18%).
Respondents were split regarding the Government’s medium term spending prospects, with 45% expecting an increase and 43% expecting a decrease in spending. The risk of over-spending appeared to be more acute than that of under-spending, but few respondents (8%) expected a dangerous deviation from what they saw as the correct level of spending. In fact, government policy is generally receiving a high (and rising) level of approval, with 54% rating it as ‘very good’ or ‘good’.
Commenting on the global picture, report author Manos Schizas, senior policy adviser with ACCA, said: “The latest survey marks a turning point in the economic recovery: weakening demand, tightening finance, loss of confidence and slowing investment. It doesn’t look good and almost no part of the world is unaffected.”
“On the other hand, there are still reasons to be optimistic. In the midst of all this, members are reporting more opportunities for their organisations and their clients; not to cut costs, but to expand and add value. That, plus the ever-decreasing reliance on government support, can only be good news,” he added.
The report is available from http://www.accaglobal.com/pubs/general/activities/library/other_issues/surveys/tech-ms-gec07.pdf