Corporate forecast stable but cautious

Ratings agency Moody’s Investors Service says the outlook for Australia’s corporate sector over the next 12 to 18 months is stable.

Moody’s senior credit officer Ian Lewis said in a statement yesterday that revenue and earnings were expected to continue to grow, helped by the demand for commodities and a high employment rate.

But uncertainty caused by renewed weakness in the global economy and international consumer confidence was likely to make Australian firms more cautious until the clear emergence of a recovery.

Moody’s said operating conditions for most companies in Australia were benign, but earnings could weaken or become more volatile as a result of the strong Australian dollar.

Austerity measures implemented by Australian firms during the global financial crisis were likely to continue, given the uncertain global economy.

Input costs were unlikely to come down soon, and wage levels and potential strikes could hurt some companies.

“We expect regional inflationary pressures, high oil prices, and strong demand for commodities to lead to input cost pressures for many manufacturers, transport companies, and others lacking strong contractual pass-through or offsetting higher product prices,” Mr Lewis said.

Article from The Australian, September 1, 2011.