Business confidence remains fragile down under

Levels of business confidence across Australia are still very fragile, as trading conditions continue to prove hard going.

Roy Morgan Research's latest barometer update has suggested that corporate sentiment remained relatively steady at 105.4 in June, which was down slightly from 105.8 in May.

However, bosses at the firm have insisted that this figure is only just in positive territory, which is a major concern.

Companies have found it difficult to justify taking out business loans because they don't want to add to their debt burden, but this could be very damaging to the economy in the long run, as enterprises need access to credit in order to expand.

According to this latest study, the majority of entrepreneurs think the economic climate in Australia will remain poor in the next 12 months. Indeed, more than half of Aussie firms think it is not a good time to invest in their business.

Industry communications director at Roy Morgan Research Norman Morris believes recent interest rate cuts have failed to lift the gloom surrounding Aussie corporations.

"The ultimate impact of reductions in interest rates on business will depend on how much of the reduction in official rates is passed on to business and how businesses react to the world economic situation, the carbon tax and other changes which combined have the potential to maintain a mood of uncertainty and low confidence," he remarked.

Bosses at the Australian Chamber of Commerce and Industry (ACCI) have also questioned the timing of the government's new carbon tax framework, which is aimed at forcing companies to reduce their CO2 emissions.

Director of economics and industry policy at the ACCI Greg Evans believes it is a concern that trading conditions have shown no sign of improving since early 2010.

Business leaders were disappointed that the Reserve Bank of Australia did not lower the national cash rate earlier this week, but economists believe that further cuts will be made by the end of the year, which should help restore business confidence.

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