FED:Economic recovery stalls in NSW: survey

AAP General News (Australia)
04-26-2011
FED:Economic recovery stalls in NSW: survey

SYDNEY, April 26 AAP - Economic recovery has stalled in NSW as businesses face increasing
strain from a record high Australian dollar, a survey shows.

NSW Business Chamber and Commonwealth Bank Business Conditions index for March fell
to -0.7 index points, down from 0.8 index points in November 2010.

The index was last below the zero level that separates expansion from contraction in
July 2010, when it was -5.9 index points.

"Sales are flat-lining, profits are falling, exports are languishing with business
conditions deteriorating over the past year," NSW Business Chamber CEO Stephen Cartwright
said in a statement on Tuesday.

"The high price of the Australian dollar, driven by the resources boom, is having a
dramatic impact on our manufacturing and services sectors."

On Thursday, the Aussie dollar hit a high of 107.73 US cents, its strongest level against
the US dollar since the currency was floated in December 1983.

The survey showed sales revenue, profits and export sales were in negative territory in March.

Sales revenue fell to -3.8 index points, down from -1.8 index points in November.

There was a slight improvement in the profits component of the survey, although it
also stayed in negative territory at -9.4 points in March compared to -13.3 points in
November.

Export sales also showed a slight improvement to -6.4 index points, compared to -12.8
points in November.

The data showed skills shortages were also a significant problem for businesses in
NSW, with 46.8 per cent of businesses saying they have a skills shortage.

This compares to November 2010, when 39 per cent of businesses reported skills shortages.

Commonwealth Bank chief economist Michael Blythe said while sales outcomes deteriorated
in the March survey, resource rich regions of NSW experienced a rise in conditions.

"The trend in export sales has improved, despite the erosion of competitiveness stemming
from the rise in the Australian dollar to new record highs," he said in a statement.

"In spite of the strong currency, NSW firms are expecting a lift in export sales, particularly
in the Hunter and Illawarra regions."

The survey also showed 32.5 per cent of the 1080 respondents believe business conditions
will be stronger over the next three months, while 43.9 per cent expect them to be the
same.

However, the survey says businesses have tended to be overly optimistic in their assessment
of future business conditions, and that actual outcomes typically fall well below expectations.

AAP eb/tr

KEYWORD: BUSINESS NSW

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