Our Latest News

Productivity gap hinders Australian firms

March 24, 2015

A lack of confidence in the economy is exacerbating productivity issues, with businesses unwilling to invest in efficiency-enhancing assets that would address the back-log of equipment impacting their operations.

These are some of the findings from the latest Alleasing Equipment Demand Index, which reveals a rise in the number of firms impacted by old assets (up four per cent since the inaugural research).  Six in ten firms are now indicating they are being negatively impacted by unproductive assets, yet only one in four intend to address the issue by acquiring new equipment during the June quarter.

These findings come despite awareness of the benefits to be gained, with businesses citing productivity (27%), lower costs (23%), business growth (22%) and fewer stoppages (12%) as reasons to transition to new assets.

Earlier Alleasing research revealed that $85 billion, or the equivalent of 5.5% of the nation’s annual GDP, is tied up in the outright purchase of equipment – funds that could be utilised for more productive means, including investment, R&D or working capital.[i]

According to Robert Spano, Alleasing’s Chief Executive Officer, a lack of confidence in the economy has left businesses sitting on their hands when they should be investing.

“We are operating in an environment with a low cost of capital and where numerous studies and business leaders are telling us that productivity is a critical issue for our nation,” said Mr Spano.

“This environment should be conducive to business investment but despite this, and an awareness of the many benefits that could result for businesses and the economy, the majority of executives aren’t prepared to act.

“We are now facing a self-perpetuating cycle of low business confidence – it is evident in our latest research and in the initial capital expenditure estimate for 2015-16 released by the Australian Bureau of Statistics.[i] The prospect of another rate cut in the near term exists but only time will tell if that is a sufficient catalyst to prompt businesses into action.”

For the 25% of businesses that do plan to acquire new assets during the June quarter, cars, trucks and information technology assets are in greatest demand. One in two businesses are indicating they need IT equipment, while six in ten need automotive assets.

In addition, the majority of businesses (69%) intend to source their assets locally. Recent movement in the Australian dollar has resulted in an increase in this number, rising four per cent since the previous survey. The construction, business services, other services, government, transport, finance and wholesale sectors all have more than 70% of firms indicating they will source locally.

This is supported by an increase in the number of firms concerned about the exchange rate, up eight per cent since last quarter to 30%.

“There are always winners and losers when fluctuations in the dollar occur,” said Mr Spano.

“While for exporters a lower dollar is usually a positive, it can also drive up the price of imported capital equipment and other manufactured input goods.
“We are seeing the impact of those fluctuations in the sourcing intentions of businesses. For local equipment suppliers, the move towards local sourcing is a positive.”

 

– ENDS –

[i]Australian Bureau of Statistics: 5625.0 – Private New Capital Expenditure and Expected Expenditure, Australia, Dec 2014

[i]  Based on APRA data and research from East & Partners Australian Asset & Equipment Finance Markets Program

 

Further information:
Danielle Woods
02 9850 5109 | 0401 140 124 | danielle.woods@alleasing.com.au

About the Alleasing Equipment Demand Index

The Alleasing Equipment Demand Index is a quarterly index, which examines the current asset inventory of Australian businesses, as well as expectations for future investment. The inaugural index was run during July and August 2014. Each quarter  ~1,200 Australian businesses that turn over $1-$100M are surveyed. These businesses have been broken into three segments: micro business ($1-5M annual turnover), SME ($5-20M annual turnover) and lower corporate ($20-100M annual turnover). The index is executed by East & Partners on behalf of Alleasing.

Alleasing is a leading, independent provider of asset finance and leasing solutions. We have financed billions of dollars of assets for businesses in Australia and New Zealand during our 25 years of operation.

Technology and your factory – are you making the most of Industry 4.0? Industry

If you’re a factory operator, you can now access a whole range of technology to help expand your offerings and streamline processes. But many factories don’t seem to be taking advantage of new technology. We look at how new technology doesn’t just benefit manufacturers but jobs, skills and the local economy.

Read full story

Food manufacturing industry hit with country of origin labelling Industry

The clock is ticking for food manufacturers who are yet to comply with strict new country of origin labelling laws must update their labels by July 1, 2018 to more clearly display where food was grown, processed and packaged. Are the new requirements more challenging for producers than initially thought?

Read full story

How can we help you?

Tell us a little about your business so we can help you find what you need.
If you’d prefer to speak to an expert you can call us on 1300 134 214.

  • If you'd prefer to call our team, you can reach them on 1300 134 214.

  • This field is for validation purposes and should be left unchanged.