Business confidence moves up but wages are unlikely to follow


While a majority believed trading conditions were weaker than a year ago, most now think that there will be a lift, with many expecting stronger sales that will require an increase in their total staff.

Executive Connection chief economic adviser Warren Hogan, industry professor at the UTS business school, said the results suggested the economy was at a turning point.

Executive Connection chief economic advisor Warren Hogan believes the company’s survey suggests the economy may have hit a turning point.Credit:Anthony Johnson

“Business confidence has reversed the slide evident since mid-2018. Following the federal
election, business leaders’ confidence is being buoyed by the recent reduction of interest rates,
strong equity markets and some better signals emerging in the housing market,” he said.

“Interest rate reductions and income tax cuts will only provide further support to business confidence and help underpin investment and hiring decisions.

“There is good reason to believe this uplift across Australia’s mid-sized organisations will positively translate into a stronger economy over the second half of 2019.”

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Firms in Victoria are the most pessimistic while more firms in NSW expect a softer economy than an improving one over the next 12 months.

There are also continuing signs that small and mid-sized firms, most of which rely on direct bank lending for their operations, are continuing to find it difficult to access lending.

While upbeat about the economy, people employed by small and medium-sized firms should not expect a pay rise any time soon.

When asked what they would do to retain existing workers, just one in five firms said they would boost the pay cheque for their staff. Forty-four per cent said they would offer flexible hours or the chance to work remotely, while 40 per cent said they would develop an “employee development program”.

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If trying to woo new staff, just 19 per cent of firms said they would boost wages, compared with 30 per cent who would look to lift investment in automating their operations.

The Reserve Bank of Australia has explicitly linked its recent back-to-back cuts in official interest rates to a strategy of driving down the unemployment rate in a bid to increase take-home wages for workers.

Only 14 per cent of company chief executives said they planned to increase wages by more than 4 per cent over the coming year, with 37 per cent saying they intended to keep wages level or adopt increases of less than 2 per cent. A third said they expected wage rises of between 2 and 3 per cent.

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