Media

9 February, 2009

The economic performance of Australian agribusinesses has lifted with rising levels of business performance and confidence, and increased capital expenditure in most states, reports the ninth Westpac and Charles Sturt University (CSU) Agribusiness Index.

"Agribusiness in Australia is showing remarkable resilience in the face of the global uncertainty and economic gloom, helped by improved seasonal conditions Western Australia and large parts of the east coast, a slower rise in operating costs and a fall in the $A which is helping support commodity prices," Westpac's Chief Executive, Agribusiness, Graham Jennings, said.

The Westpac and CSU Agribusiness Index is a nationwide survey of 1200 businesses in the agriculture sector conducted every quarter with results available for each state and 48 divisions across regional Australia.

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 December EPI lifted by 5 basis points, from -0.02 in September to +0.03, a return to positive after two quarters of negative results and a significant improvement on the -0.12 recorded 12 months ago.

"All states, except for South Australia, reported positive EPI results with New South Wales, Victoria and Western Australia reporting an improvement on last quarter," said Mr Jennings.

"The resilience is evident looking forward to the March quarter where agribusinesses are equally positive in their outlook."

The largest EPI improvement was recorded in New South Wales, which lifted into positive territory to from -0.10 in the September quarter to +0.02 in the December quarter. Victoria also recorded a positive EPI in the December quarter of +0.03, after recording -0.04 in the previous quarter. Western Australia increased from +0.08 to +0.12, the highest EPI of all states. The EPI for other states fell, with Queensland down from +0.06 to +0.04 and Tasmania down from +0.10 to +0.06. South Australia was the only state that recorded a negative EPI in the December quarter, at -0.08 down from -0.04 in the September quarter.

"Capital expenditure by agribusinesses also rose, particularly in the north and west of the country where they have had significant rainfall, reflecting Australian agribusinesses' confidence in the future," Mr Jennings said.

Westpac and CSU Agribusiness Index survey co-ordinator and CEO of CSU's Western Research Institute, Tom Murphy, notes business confidence, separately recorded in the survey, improved.

"Nationally, 67% of agribusinesses surveyed feel confident about the performance of their businesses over the next twelve months, an increase of 4% over the previous survey, with New South Wales, Western Australia, Victoria and South Australia all reporting increased confidence," Mr Murphy said.

"Business confidence has been boosted by the slowest rate of operating cost increases reported in the last two years," Mr Murphy said. "As we are seeing with inflation around Australia, the rate of increase in agribusiness operating costs slowed sharply in the December quarter, aided by lower costs for fuel, freight, fertilizer and chemicals."

Operating cost increases were recorded at 0.42 for all Australian agribusinesses in the December quarter, well down on 0.63 in the September 2008 quarter and 0.54 in December 2007.

"With operating cost increases stabilising, agribusiness is now willing to invest for the longer term in spite of the challenging economic environment," Mr Jennings concluded, "Such investment needs to be done cautiously and with appropriate advice, and of course remains largely dependent on suitable rainfall at the right times."

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