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New survey paints picture of recession

The World Today - Tuesday, 10 February , 2009 12:42:00

Reporter: Peter Ryan

BRENDAN TREMBATH: A closely watched business survey out today has signalled that the Australian
economy might already be in recession.

The National Australia Bank's monthly business survey suggests confidence is back at recessionary
lows, despite a retail spending inspired bounce in December.

I'm joined in the studio now by business editor Peter Ryan.

Well what does this latest survey tell us about the health of the economy?

PETER RYAN: Well Brendan, this monthly survey says confidence has returned to record lows after a
December blip - back to the levels before the Government's $10-billion stimulus package late last

It says forward orders and employment remain at "recessionary lows", and there've been more falls
in capital spending, and capacity utilisation.

It says manufacturing, transport and construction are also falling rapidly to recessionary levels.

Exports are sharply lower and the survey implies no growth at all in domestic demand for the time
being at least.

BRENDAN TREMBATH: But the gloomy outlook is not necessarily the case for the electronic retailer JB

PETER RYAN: Yes, Brendan. JB Hi-Fi is bucking the trend. It's notched up a half year profit of
$59-million. That is a record and a 40 per cent improvement on this time last year.

The retailer is expecting another strong year of steady profit margins, despite a lot of
discounting it has withstood from its competitors.

There have been strong sales particularly in home entertainment, games, satellite navigation,
computers and mobile phones and the retailer's chief executive Richard Uechtritz says JB Hi-Fi is
now planning to open 150 new stores in Australia and New Zealand over the next couple of years.

And he's examining a range of expansion opportunities as competitors bite the dust.

RICHARD UECHTRITZ: Companies like Crazy Clarks and GoLo are possibilities and some car sound sales
that would otherwise have gone to the Strathfield business upon closure of some of those stores.

Like a lot of industries, the big are getting bigger and stronger. Ourselves, Harvey Norman, the
Good Guys - most other players are struggling.

Large retailers will come out of this downturn in an even stronger position.

BRENDAN TREMBATH: The chief executive of JB Hi-Fi, Richard Uechtriz.

But could those expansion plans come unstuck Peter Ryan, if the global economic deterioration
plunges Australia into a recession?

PETER RYAN: Well Brendan that is an ever present threat and no chief executive at the moment is
willing to lock him or herself into any profit estimate.

But Richard Uechtriz noted the benefits of deep cuts to official interest rates recently and the
prospect of more to come.

And he believes the government's $42-billion stimulus package will help consumer confidence.

But as I said, like many CEO's at the moment, Mr Uechtritz is looking at an uncertain horizon and a
range of volatile factors that really do underline the risks ahead, especially given the prospect
of rising unemployment.

RICHARD UECHTRITZ: No one can guess where we're going. We can make some good assumptions on where
everything is going but all we can do is do what retailers should do and let the broader factors
look after themselves.

If, for example, unemployment goes up and if the sales are not as strong as they are but we are
doing everything right, then we are happy.

And remember, we have traded through this period and there is probably only one other company in
the country being Woolworths that have traded strongly through this period.

BRENDAN TREMBATH: The chief executive of JB Hi-Fi, Richard Uechtriz.

The strong result from the company was something of a surprise given the current trading
conditions. How has the share market reacted?

PETER RYAN: JB Hi-Fi shares jumped more than 14 per cent after that profit announcement. Mainly
because of that unexpected news but there was another surprise result this morning from the maker
of the bionic ear, Cochlear. Its half year profit rose 22 per cent - better than expected at
$70-million and Cochlear's shares are up around four per cent this morning.

All this on a day importantly when the overall market is weaker with concerns about the overall
local economy and global economy and as a result the All Ordinaries is down around one per cent.

BRENDAN TREMBATH: Business editor Peter Ryan.