Mining sector cautious but optimisitc: report

Commonwealth Bank’s Future Business Index shows that while mining companies are optimistic about the future, they are unlikely to undertake new capital investment.

Commonwealth Bank’s Future Business Index shows that while mining companies are optimistic about the future, they are unlikely to undertake new capital investment.

The Index, which analyses the view of financial decision makers in companies with a turnover of $10m – $100m,  measures outlooks on business conditions, investment plans and projected revenue.

At the unveiling of the report yesterday Symon Brewis-Weston, Commonwealth Bank’s executive general manager for corporate financial services, said that the “appetite to take risk has fallen slightly.”

“That may lead to a hiring slowdown and we’ve probably seen that in the job ads which have been flat and falling over the last couple of months.”

While the report shows that overall the mining sector is up seven points to 17.7, state-by-state outlooks show how confidence in the mining sector has been affected in recent times.

Brewis-Weston, said that the talk of the slowdown in Asia is ‘affecting business confidence in Western Australia’ which saw a sharp decline from 16.7 to -2.

South Australia also suffered a high decrease from 7.3 to -10.1, with Brewis-Weston saying the decision to shelve the Olympic Dam project ‘knocked that place for six.’

The Index also showed only one third of businesses plan to increase capital expenditure over the next 6 months while 23 per cent of businesses surveyed said they planned to reduce staff headcount.

Chief economist of Commonwealth, Michael Blythe says declines in business confidence reflect ‘business conditions, revenue expectations and perceived ability to deal with future volatility.’

“Rising concerns about Chinese economic prospects are evident in those domestic sectors most exposed to the China story. And rising concerns about cost pressures are evident in worries about energy and associated government decisions,” he said.