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Business confidence, investment outlook hit lows. But why do companies still want to hire more?

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Two separate surveys suggest Australian business confidence is at a 30-month low and the outlook for capital investment is at an 18-month low. So, why are Australian businesses gearing up to hire ever more employees?

It’s a head-scratcher.

One plausible explanation comes from Jacqueline Lehmann, the country manager for Regus, a global provider of flexible workspace that conducted one of the surveys.

“The fall in national business confidence can in part be attributed to rising costs for businesses driven by the strong dollar and workplace-related spending,” said Lehmann.

As to the expectations of increased hiring – 84% of businesses plan to increase or maintain headcount in 2013 – Australian companies might simply need to invest more in sales and marketing (to sell in a down economy?), and operations, and small businesses still “have one eye on growth.”

Need to raise productivity

Lehmann sees a challenge in the desire for businesses to hire more when the broader economy remains depressed.

“Businesses of all sizes need to consider how to ramp up productivity while controlling costs, and the key to do this is to maintain agility and flexibility in how they run their operations,” she said. Regus also is “seeing increasing demand for flexible space across Australia from companies looking for smart ways to grow in a challenging market.”

The Regus Business Confidence Index (BCI) was a global survey of over 26,000 companies in 90 countries. In Australia, the index stood at 105, down 11 points from six months ago, compared to the global index, which rose three points to 114. Also, the decline in Australia represented the largest fall among 14 major economies tracked, and the lowest since October 2010.

The other set of findings comes from Dun & Bradstreet’s National Business Expectations Survey. Its overarching conclusion: “Fewer Australian businesses expect to make large investments in the coming months, given the patchy performance of the economy.” The capital investment outlook is at its lowest point since the September 2011 quarter but also closer to the level of recent activity, with actual capital investment during the December 2012 quarter below the 10-year average, at an index of one.

‘‘What we are seeing is a business community that is still wary, still looking for sustained improvement in the state of the economy,’’ D&B corporate affairs director Danielle Woods said in a statement.

Dun & Bradstreet’s finding on employment is somewhat at variance with that of Regus. Its forward-looking index suggests near-term employment will be flat, even though ABS employment figures show more than 70,000 jobs were created in February.

With the actual employment index tracking below expectations for the past three quarters, levels of unemployment look set to remain a factor in consumer spending and subsequently business growth, the survey concludes.

(Image source: Bigstock)

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