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The ACCI Business Barometer: identifying Australia's economic trends.



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ABN 85 008 391 795

A U S T R A L I A N C H A M B E R O F C O M M E R C E A N D I N D U S T R Y

MR 04 / 01

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

MEDIA RELEASE May be reported on: Monday, January 15, 2001 The ACCI Business Barometer™ Identifying Australia’s Economic Trends Statement by Mark Paterson, Chief Executive on the release of the January 2001 ACCI Review Amongst the rarest of economic indicators is an accurate measure of the current state of the national economy. It is in many respects the Philosopher’s Stone of economic management since without a reliable contemporary measure of conditions, policy becomes largely based on statistical series which tell us something about the past but very little about the present or future. It was to overcome this deficiency that business surveys were first developed. The value of such surveys is that they provide timely data on current economic conditions. A properly conducted business survey can alert policy makers to changing economic conditions well before such changes have registered in any of the official statistics. The current slowdown in the Australian economy, which is now recognised by one and all, had been registering within business surveys for more than half a year. These surveys, because they are completed by the owners and managers of Australian firms, provide an early warning mechanism on the likely direction of economic trends. Without the results of business surveys, policy makers have virtually no data upon which to build a rounded picture of the economy. At the same time, the slowing in the labour market had been foretold in one business survey after another during the previous half year. That this slowdown has now come to pass is of no surprise to those who had previously noted the results of these surveys. Business surveys work. They provide accurate and timely information about the state of the national economy and they delve into every aspect of economic concern. They provide information on general business conditions, sales, investment, employment, the direction of the price level and much more. Moreover, such surveys concentrate on the private sector through which the wealth of this nation is created. ACCI has now taken its three national surveys and combined them into a single index. The initial aim was to demonstrate the accuracy of our business surveys. The result was the construction of a measure of the state of the national economy which may well be the most accurate contemporary indicator of current economic conditions we now have. We have named this measure the ACCI Business Barometer™. What it does is measure not just the direction of economic activity but also the relative strength of the economy at different points in time.

MR 04 / 01

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

The barometer, because it is in part constructed from the ACCI/Westpac Survey, already has a history stretching back to 1966. It thus has 35 years of economic change and volatility behind it. And what is remarkable about the index is that it accurately portrays not just the contours of the economy, but provides a measure of the relative depths of recessions and the alternating periods of strength over that entire period. No one looking at the barometer who is familiar with Australia’s economic history for the past three and a half decades would be in any doubt about the accuracy of this measure as a guide to the past.

That is why we will now publish this index each month as it is updated with the results of each of ACCI’s surveys as they appear. This barometer will continue to provide a measure of the relative strength and direction of the economy. We fully expect that this index will be as accurate in the future as it has been in the past.

The barometer for the period since 1987 is shown in the chart below. It captures the massive downturn which occurred following the raising of rates in 1989. It identifies the recovery towards one of the strongest upturns experienced in this economy followed by the slowdown due to a series of rate rise in 1994. It picks up the partial recovery in 1996 along with the subsequent slowing in 1997 due to the economic crisis in Asia. There is then a partial recovery which peaks in December last year.

The final episode is the downturn which has been continuous throughout 2000 and according to the barometer has continued into the start of 2001.

This is an index that clearly tells us something about the state of the economy. It identifies its peaks and troughs and provides a measure of the economy’s relative strengths in different periods of time. If the barometer is as accurate in the future as it has been about the past, it should become one of the most important economic indicators we have.

For further comment, please contact: Mr Mark Paterson 02 6273 2311 (B/H) Chief Executive 0419 215 037 (mobile)

Dr Steven Kates 02 6273 2311 (B/H)

Chief Economist 02 6295 0827 (A/H)

Business Barometer Trend (1998 = 100.0)

50

60

70

80

90

100

110

120

130

140

150

Mar-87

Sep-87

Mar-88

Sep-88

Mar-89

Sep-89

Mar-90

Sep-90

Mar-91

Sep-91

Mar-92

Sep-92

Mar-93

Sep-93

Mar-94

Sep-94

Mar-95

Sep-95

Mar-96

Sep-96

Mar-97

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

Index

5 6 7 8

TM