Australian business conditions were at their worst levels in 17 years in the previous quarter, according to a National Australia Bank survey.
The survey of 900 firms also shows that businesses are more pessimistic about forward orders and exports. Chief economist Alan Oster told Reuters that businesses are the most pessimistic since the survey began in 1988.
“The most concerning aspect of the survey is the continuing deterioration in both near and especially medium term expectations,” he said.
“Clearly business is expecting further significant deterioration in economic activity.”
The business conditions index for the next year dropped to -24 points from -21 in the fourth quarter of last year, while overall business conditions in the first quarter dropped to -20 from -16; the lowest point since 1992.
The survey shows that capital spending plans are only up to -12 from a record low of -15 in the previous quarter.
“Clearly our forecasts see things getting much worse,” Oster said, also saying he expects the RBA to continue to make cuts to the official interest rate.
Despite the gloomy news, the Australian sharemarket has opened higher on the back of three-month highs on Wall Street.
The benchmark S&P/ASX200 index was up 82.4 points or 2.23% to 3777.7 at 12.15 AEST. The dollar has also opened higher to US72 cents.
Commonwealth Bank shares have gained 1.5% to $35.02, as NAB jumped 3% to $21.16. ANZ has jumped 2.5% to $15.79 as Westpac has risen 1.4% to $19.11.
Overseas, US GDP contracted by 6.1% in the first quarter, but the Federal Reserve has announced that the pace of deterioration is beginning to slow, and that it will continue to keep interest rates low.
“Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower,” the Fed said in a statement after a two-day policy meeting.
The Federal Reserve has decided to keep interest rates in the zero to 0.25% range.
On Wall Street, the markets rose with investors believing that the contraction will soon usher in signs of recovery. The Dow Jones Industrial Average gained 168.78 points or 2.11% to 8185.73.
Elsewhere overseas, the Bank of Japan is now expected to cut its forecast for the Japanese economy. The bank now expects the economy will shrink by 3% to 4% in the 2009 fiscal year, the Nikkei business paper has reported.
Meanwhile, Alumina, the world’s largest supplier of alumina, says it will raise over $1 billion in a share sale to help pay off debts. The company has entered a trading halt.
“The equity raising will strengthen our balance sheet and effectively remove the 2010 debt refinancing risk,” chief executive John Bevan said in a statement.
BankWest has said that bad loans to property developers in NSW and Queensland are to blame for a $139 million loss last year.
Parent company Commonwealth Bank said the bank is well capitalised and that the final price of its acquisition will be determined in the next two months.
“As advised at the time of the acquisition of BankWest, the group is purchasing a bank which is appropriately capitalised and provisioned,” Commonwealth Bank said in a statement. Chief executive Ralph Norris told Business Spectator that BankWest’s performance has been good.
“We are pleased with the progress that has been made since we acquired BankWest on 19 December 2009, and performance in the March quarter has been good.
“We have identified many opportunities to improve the performance of BankWest and we remain confident that this acquisition will create significant value for the group.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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