Strong Aussie dollar impacting business profit expectations

Australian one dollar coin standing on its edge

Small businesses, especially those in retail and manufacturing, hold great concern over the impact the high Australian dollar will have on operations during the June quarter.

The Dun & Bradstreet National Business Expectations Survey has found the outlook for the June quarter 2012 is less than positive.

“The pressure of a sustained high in the Australian dollar is starting to bite for main street businesses,” Dun & Bradstreet CEO Gareth Jones said.

Concern over the dollar grew noticeably among retailers, rising 12 percentage points to reach 37 percent during February. Retailers also downgraded profit expectations, with more than half anticipating slowing demand in the year ahead.

Although there’s been an increase in sales and profit expectations, which now sit 15 points above the recent low during September 2011 quarter, employment expectations have decreased two points to an index of five and are just three points above the ten-year-average index.

“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,” Jones added.

Almost three quarters of firms indicated they wouldn’t seek credit to grow operations over the next quarter, and said they’ll also be keeping a close watch on interest rates with more than a third expecting rates will be most influential on their operations over the quarter. Concern over interest rates rose nearly 10 points since last month, with unease most noticeable among retail businesses.

“This caution amongst businesses is increasingly being seen through a focus on consolidation rather than growth,” Jones added

The business survey also outlined issues expected to influence operations in June quarter 2012. It found 15 percent of firms believe fuel prices will be their main concern, down five percentage points.

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