Investment Decisions not Impacted by Lower Australian Rates

Corporate Australia has priced in lower interest rates (Picture: Melissa Walker)

Survey of Australian CFO’s Reveals Lower Interest Rates Are Having No Impact On Investment Decisions

(AAP Medianet)

An Australian survey published this week by consultancy firm Adept Profit Builders found the general sentiment among Australian companies is that the economy will remain steady over the coming 12 months, however, 55% felt the economy would negatively impact their business performance. “Given 91% felt interest rates would have no impact on sales over the next 12 months this strongly suggests companies are expecting margins to be squeezed”, said, the report’s publisher, Gary Bigelow.

In response to questions relating to the impact of the current interest rate trend 91% believed falling interest rates would not impact sales suggesting consumers are likely to “keep their hands in their pockets” rather than spend tax cuts. More importantly 64% believe falling interest rates will not impact on their capital acquisition decisions.

The news for employment expressed in the survey outcome was also not good with 27% freezing new hires and replacement hires and another 36% having no plans to alter their headcount. While 36% said their headcount would match growth expectations this must be read in context of the overall position that growth will remain steady at its current sluggish rate.

These results are echoed in today’s press reports of the expectation of former Australian Treasurer Peter Costello, who last week said, “Now, what will a rate cut do for the economy? In my view, not much. We’ve already got a cash rate of 1 per cent, suppose it goes to 0.75 per cent, suppose it goes to 0.5 per cent. All these people who are holding off spending or borrowing or investing are going to say ‘I wouldn’t have done it at 1 per cent, but I’m going out there now that it’s 0.75 per cent?’ I don’t think that’s going to happen.”