The consistently high Australian Dollar has got many local businesses worried, particularly those in retail and manufacturing, according to the latest Dun & Bradstreet national business expectations survey.
More than a third of businesses, up nearly 40 per cent on last month, expect the high exchange rate to have a negative impact on their operations in the June quarter.
According to Dun & Bradstreet CEO, Gareth Jones, businesses continue to remain cautious in response to increasingly conservative consumers and the maintenance of a relatively high local currency.
“This caution amongst businesses is increasingly being seen through a focus on consolidation rather than growth,” he said.
“Small businesses in particular appear to be focused on maintaining profitability and cash flow by improving margins through, for example, paring back operational costs rather than looking to grow operations through greater investment and expansion of their workforce.”
“Clearly, the pressure of a sustained high in the Australian dollar is starting to bite for main street businesses.”
Concern over the dollar grew noticeably among retailers, rising 12 percentage points to reach 37 per cent during February. Retailers also downgraded profit expectations, with more than half anticipating slowing demand in the year ahead.
This comes amid continued gloom over competition from online sellers, with nearly half of all retailers expecting internet competitors will have an adverse effect on their operations.
“Consumers are increasingly savvy and adept at seeking out cheaper alternatives. Businesses need to adapt quickly or risk losing customers overseas,” Jones said.
This underlines recent figures from the Reserve Bank which indicated that business credit fell by 0.2 per cent in January. Firms are also keeping a close eye on interest rates where concern rose by nearly 10 points since last month, with unease most noticeable among retail businesses.
According to Duncan Ironmonger, Dun & Bradstreet’s economic consultant, the survey indicates the difficulties of many businesses in adjusting to the structural re-alignment of the economy as the mining boom continues to draw resources away from manufacturing and distribution sectors.
“The latest ABS data on capital expenditure expectations for 2011-12 and 2012-13 show very large rises in mining capital expenditure of more than 50 per cent each year. This is, however, accompanied by declines in capital expenditure in other sectors of the economy,” he said.
“The survey also highlights the dramatic change in sentiment about the impact of the high Australian dollar with February, for the first time, indicating a net negative impact.”