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Business confidence continues to rise



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The results of A C C I’s Survey o f Investor Confidence for January 1998 show a surprising degree of resilience in the face o f the deepening problems o f our trading partners in Asia.

Business confidence has risen since the last survey in October. And while it is clear that respondents are mindful o f the turmoil occurring in Asia, they nevertheless remain confident about the overall state o f the economy.

This is not to say that survey respondents are unaware o f these problems. There is an expectation that growth rates will level off. But at this stage, there is no evidence that economic conditions will fall sharply or that unemployment will begin to rise.

Instead, the evidence o f the survey indicates that a degree o f momentum has built up within the Australian economy and that there is a good chance that the economy will be able to avoid most o f the problems now confronting the economies in South East Asia.

Indeed, there has been a major improvement in the level o f confidence since the previous survey in October.

When the previous survey was conducted, more than two respondents in five continued to describe economic conditions as less than satisfactory. Now only around a quarter of respondents find conditions less than satisfactory.

These are, o f course, early days given just how deep the problems in Asia have shown themselves to be. But they do provide an indication that the problems may not be as severe as some forecasts have previously suggested.

In viewing conditions within their own businesses, respondents were more optimistic than they had been in October.

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Immediate 2 February 1998

Business Confidence Continues to Rise Result ----------- " ^ ' " n e e for January

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Statement by Mark Paterson, C hief Executive

L E A D I N G A U S T R A L I A N B U S I N E S S

More than two respondents in five described conditions within their own firms as more than satisfactory. While a number o f businesses continue to find conditions difficult, the proportion o f such firms has fallen.

The survey also seeks information from respondents on the importance o f a list o f twenty factors as constraints on the level o f investment. The single greatest constraint on investment remains the problems caused for business by taxes and government charges.

The major change in the January 1998 results is the rise in a number o f industrial relations constraints, with wage and non-wage labour costs having risen while union resistance to change has entered the top ten list.

Availability o f suitably qualified employees remains in the top ten list, a further sign of recovery showing that the demand for labour is continuing to tighten.

These are early days. The turmoil in Asia will have a significant effect on the domestic economy. But there are also good reasons to believe that Australia will avoid the worst of the problems.

As the survey shows, Australia is making a good start in dealing with these problems. Ensuring that we encourage the further development o f flexible economic institutions will be essential if Australia is to continue to thrive in the midst o f the turbulence now occurring to our north.

For further comment, please contact: Mr Mark Paterson 02 6273 2311 (B/H) Chief Executive 016 280 664 (pager)

Dr Steven Kates 02 6273 2311 (B/H)

Chief Economist 02 6295 0827 (A/H)

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L E A D I N G A U S T R A L I A N B U S I N E S S