Media

26 October 2009

A lift in employment levels by Australian agribusiness in the September quarter, on the back of positive economic performance, is a highlight of the twelfth Westpac and Charles Sturt University (CSU) Agribusiness Index released today.

The national quarterly survey also reports that only a quarter of agribusinesses have taken advantage of the Federal Government’s business stimulus investment allowance, spending on machinery and equipment or on vehicles.

“The economic performance of Australian agribusiness remains positive and they have responded by lifting employment. For the first time in the history of the Survey, the employment index was positive in the September quarter as the agribusiness sector contributed to Australia’s surprisingly good employment performance, despite the economic slowdown,” Westpac’s Chief Executive, Agribusiness, Graham Jennings said.

The Westpac and CSU Agribusiness Index reports 27 per cent of agribusinesses surveyed had taken advantage of the Government’s investment allowance.

“Agribusinesses did see a lift in capital expenditure in the September quarter, although at a slower rate than in the June quarter.

”Agribusinesses face challenges in managing their cash-flow and even with the Government’s incentives, remain cautious in their capital spending, focusing on smaller cost items rather than big-ticket items,” Mr Jennings continued.

Of the agribusinesses that have used the Government’s accelerated investment allowance, 47 per cent spent the allowance on machinery and equipment and 41per cent purchased vehicles. Only six per cent purchased computers or IT equipment.

The September quarter survey canvassed the current economic performance of Australian agribusiness. The quarterly survey is used to calculate the Economic Performance Index (EPI) based on the average of results for business performance, employment and investment indicators. The EPI ranges between -1 (worst result) and +1 (best result) where a “satisfactory” result is when the EPI is zero.

The EPI in the September quarter was +0.02, down a little on the June quarter result of +0.05 but above the -0.02 recorded in September 2008.

“It is not surprising to see the EPI weaken a little across Australia as rainfall was patchy and poorly timed in the September quarter. In Queensland, New South Wales and Western Australia this has dampened the performance among the producer sector in particular,” Mr Jennings said.

The EPI fell for all states. The highest EPI in the September quarter was recorded in South Australia at +0.12, down from +0.15 in the June quarter. The EPI in Western Australia fell the most in the quarter, by 7 points, although WA still recorded the second highest EPI at +0.09. The EPI in Tasmania and Queensland was positive at +0.05 and +0.06, down 1 point and 4 points respectively. New South Wales fell 1 point after the strong rise recorded in the June quarter to be -0.01. Victoria recorded the lowest EPI in the September quarter at -0.04, down 3 points.

The EPI was positive in all three sectors in the September quarter, although it fell in the Producer and Upstream (suppliers) sectors in the September quarter to +0.01 and +0.08 respectively. It increased to +0.16 in the Downstream (wholesale and retail businesses) sector.

Westpac and CSU Agribusiness Index survey co-ordinator and CEO of CSU’s Western Research Institute, Tom Murphy, noted that business confidence among agribusinesses fell slightly in the September quarter, although it improved in a number of states.

“Business confidence among Australian agribusinesses fell a little in the September quarter, with 69per cent of businesses confident about the next 12 months, down from 72per cent in June. However, this is the highest level of confidence ever recorded in the September quarter and four of the six states actually reported an increase in business confidence,” Mr Murphy said.

“The downturn in business confidence in the September quarter was mainly due to a strong fall in business confidence among agribusinesses in Tasmania and Queensland.”

Mr Jennings says that there are challenges for Australian agribusiness ahead even though the outlook is positive.

“The better-than-expected performance of the Australian economy, helped by the continued strong performance of export industries, including the agricultural sector, is bringing some challenges. In particular, the sharp rise in the Australian dollar will be a significant issue agribusinesses in Australia will need to manage,” Mr Jennings concluded.

For the latest Westpac and Charles Sturt University Agribusiness Index, visit westpac.com.au/ agribusiness.