Mid-year reporting is well underway and many of the large ASX listed companies have met or exceeded expectations of investors.
In terms of the stock market it has been a dream start to the year, with the two main indices (the All Ords and the ASX 200) having reached above 5,000 for the first time since April 2010. Since the start of the year the market has risen 6.6%.
According to a recent Deloitte survey* a group of people, who are typically more careful than most, Chief Financial Officers (CFOs), are even starting to feel more positive about the economic outlook and their own company’s fortunes.
Reduced interest rates, stronger growth in China and the increased price of iron ore have all combined to improve the outlook amongst the CFOs of listed companies who took part in the quarterly study.
In terms of the Western Sydney outlook, improved confidence at this level can translate into more significant investment, new job creation and increased spending on our high streets.
The survey tells us that 70% of CFOs expect to see positive revenue growth in the coming year and 63% expect an increase in cash-flow over the same period.
These two key indicators should translate into more decisive action from Australian businesses, many of whom have been understandably reluctant to embark on more risky (and potentially rewarding) strategies in the last couple of years.
It seems the spike in heavy mining investment is fading and this opens up more opportunities for the other 80% of the economy to take a greater share of investment dollars.
The improved availability of credit and investment funds could be used to purchase and build new premises, carry out an acquisition or invest in new production equipment - all good news for our local manufacturing sector.
If you’re in the service industry in Western Sydney you may see increased interest and activity from companies who are looking to recruit additional permanent or contract staff, invest in training for their staff, ramp up business development activity or refresh their IT systems.
With two cuts to the official cash rate in the fourth quarter of the last calendar year, falling interest rates are having a positive impact on optimism at both a personal level, especially among home owners, and with business borrowers.
Many economists and business commentators are predicting further cuts in the coming quarter, which is only helping to raise optimism levels. Perhaps 2013’s election will be a turning point, where economic uncertainty is concerned.
We know that business hates uncertainty and resolving the current hung parliament issue could be the final push that helps Australia’s CFOs to turn their confidence into action.
As the “CFO” in our house, responsible for keeping a track on our family’s income and expenditure I certainly feel like the scales are tipping back in our favour. I might just pop out and buy a new pair of shoes! *The CFO Survey, Q4 2012, Shifting gears, Deloitte, January 2013
Kate Hill is a partner at Deloitte Private Western Sydney. Contact her at 02 9840 7049 or email khill@deloitte.com.au
