Australian agribusiness confident in the future
26 July 2010
Australian agribusinesses are reporting strong business performance and being rewarded for their long term outlook with 81 per cent of businesses surveyed having operated for more than a decade, reports the fifteenth Westpac and Charles Sturt University (CSU) Agribusiness Index released today.
The report reveals that agribusiness performance was positive across Australia in the June quarter. Business confidence remained high at an average of 70 per cent and capital expenditure reached the highest level recorded since the quarterly survey began in 2006.
“The improved business performance of all three sectors surveyed – upstream (suppliers), downstream (manufacturing and transport) and primary producers – was influenced by increased consumer demand and positive seasonal conditions,” Westpac’s Chief Executive Agribusiness Graham Jennings said.
Mr Jennings said the results need to be considered in light of the challenges the industry has faced in the past decade.
“The longevity and resilience of Australian agribusinesses is phenomenal,” he said. “These businesses have faced drought, the vagaries of international demand and a volatile currency.
“Australian agribusinesses have adapted and changed as the circumstances have demanded. They are continuing to invest in capital improvements to remain in business for many years to come.
“Australian agribusinesses increased their investment in the agricultural sector in the June quarter, with the seventh consecutive quarterly lift in capital expenditure since September 2008. This confirms their faith in the long-term prospects for agriculture in this country.
“Capital spending was up in every state, with the strongest rises reported in the south-eastern states (Tasmania, Victoria and South Australia).
“Producers are responding to good autumn seasonal conditions in several states by investing in capital such as farm sheds and farm machinery.
“Agribusinesses are also expecting further improvements in the coming quarter, with downstream businesses expecting a significant rise in business performance,” Mr Jennings said.
“With the investments that have been made, the drain on resources during the drought and spending on production for this season, Westpac is expecting cash to be tighter in the short term,” he said.
Results from the quarterly survey are 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.
For Australia the overall EPI rose to +0.07 in the June quarter, up from +0.06 in the March quarter and above the +0.05 recorded for the June quarter 2009. The June 2010 result is the highest national EPI recorded since the beginning of the Survey. All states reported positive EPI results and Victoria recorded its best-ever EPI result.
Westpac and CSU Agribusiness Index survey co-ordinator and CEO of CSU’s Western Research Institute, Tom Murphy, said the results highlighted future opportunities for businesses in the sector.
“Eight out of every 10 agribusinesses surveyed have been operating for more than 10 years and a further nine per cent have been operating for between six and 10 years,” Mr Murphy said. “Only five per cent of businesses have been operating for two years or less.
“There is a place for new entrants and new services but there are also succession planning options.”
“Of the businesses that have started in the past two years, 89 per cent took over the business. Only 11 per cent started the business themselves,” Mr Murphy said.
“Westpac is supporting agribusiness’s confidence in the bush,” Mr Jennings said.
“We are continuing to lend to Australian agribusinesses and make substantial investments in our regional and rural banking, including bringing back local bank managers that have the power to make local decisions.
“Westpac is committed to ensuring that agribusiness remains a foundation of the Australian economy,” Mr Jennings said.