Chief executives fear worst is yet to comeTeresa Ooi | March 10,...

Chief executives fear worst is yet to come

Teresa Ooi | March 10, 2009

COMPANIES weighed under by the global financial crisis believe the worst is yet to come, with chief executives fearing further falls in sales and profits.

At least 65 per cent of firms expect profits to fall in the June quarter because of the deteriorating economy, according to the latest Dun & Bradstreet business expectations survey. And 57 per cent of the 1200 firms surveyed anticipate a drop in sales.

This has prompted at least 27 per cent of firms to consider cutting staff numbers in the June quarter while 12 per cent expect to cut back on capital investment.

"There is no doubt that we are not yet through the worst of the crisis and indeed many businesses are only just starting to feel the impact on the ground," D&B chief executive Christine Christian said.

She said that the worsening employment outlook was of grave concern.

The survey's measure of employment expectations fell 11 index points to minus 25 -- the lowest level recorded since the survey started 21 years ago. "This is a clear sign businesses are preparing for the worst and the impact on Australian households could be significant," she said.

The falling Australian dollar and changing credit market conditions continue to affect business operations with 54 per cent of firms negatively affected by the credit squeeze and 74 per cent hurt by the depreciating dollar.

Wholesale businesses felt the full brunt of the falling dollar with 84 per cent suffering the adverse effects.

Ms Christian said the survey showed that the federal Government's economic stimulus package was not only necessary, but more needed to be done before the end of the year. "The question is not whether the package could stop Australia sliding into recession but rather how much worse could it be without government intervention."

The survey of 1200 business owners and top executives was conducted during the December quarter when the economy suffered its first contraction in eight years.

This uncertain outlook has curbed capital investment among companies with 12 per cent planning to scale back capital expenditure compared to just 2 per cent planning to increase.


http://www.theaustralian.news.com.au/business/story/0,28124,25162292-36418,00.html