Businesses slow to act on Australia’s booming economy

Businesses must become more confident in order to take advantage of higher levels of discretionary spending and overall prosperity, experts have said, following the latest release of a new index.

The CommSec National Performance Gauge rose 4% over 2009, outplaying international economies.

The NPG stood at 136.5 at the end of 2009, a 9.5% increase from the September quarter 2008 low point. All components of the gauge rose, except for the unemployment rate, with the main drivers of prosperity higher confidence levels and a drop in the number of weeks taken to pay off an average mortgage.

Currently a worker on the average wage takes 1.58 weeks to make the monthly mortgage repayment, a level similar to that recorded five years ago.

The Australian Capital Territory recorded the highest level on the gauge at 148.8, while Victoria took the lowest point at 134.1.

At the end of 2009, real quarterly retail trade per capita was $2,600, or just over $10,400 over the year. Real spending per capita rose by 1.3%, with gains of 7.3% over the past five years.

The gauge found it takes a person on an average wage just under 30 weeks to purchase a new Ford Falcon, down from 36 weeks five years ago, with affordability in this index at its strongest in 35 years. Additionally, just over 1,000 litres of petrol can be purchased each week on an average wage.

Income per head increased by 6% over the past five years, with retail spending per head up by 7%. The jobless rate is well down on the long-term average of slightly over 7%.

Investors are also enjoying prosperous times, the gauge has found, with the share price index ending 2009 just over 11% higher than the year previously. Shares rose by 8.2% over the past five years and 50.4% over the decade.

Property investors have also done well, with house prices gaining 13.6% over 2009, 40% over the past five years and a massive 138% over the decade.

CommSec economist Craig James says the gauge reveals the overall economy performed extremely well during the downturn, and businesses need to pay attention in order to take advantage of the booming conditions.

“I find when I’m doing presentations that people just don’t realise how well the Australian economy performed. If people take on the confidence of our current state of play and know the true nature of the economy, then they will have confidence going forward in employment and so on.”

“I think businesses were very worried last year when things appeared to be weakening, but the figures show unemployment wasn’t going through the roof and you have good news stories coming out. Businesses were always going to feel cautious… but I think these figures show things aren’t as bad and business confidence should rise as a result.”

Retail analyst Rob Lake says businesses must work to take advantage of these booming conditions by not shying away from opportunities to increase sales, employ and return to normal business conditions.

“Businesses went through a nervous period last where they got nervous through stock levels and hiring, but things are returning to normal now. The big nasty was going to be unemployment and that appears to have peaked. Things are getting better.”