Australia's risk outlook 'improving': D&B survey


Australia has been classified as a low risk environment for business investment while other developed nations remain 'sluggish'

Australia's risk outlook 'improving': D&B survey
Australia's risk outlook 'improving': D&B survey

April 20, 2010

Australia is well on the way to recovery following the GFC, while new data reveals many of its international counterparts are still struggling in terms of economic and commercial risk.

According to Dun & Bradstreet’s (D&B) latest Economic and Risk Outlook Report, 16 countries around the globe have had their country ratings downgraded since the start of 2010.

Despite this poor result, the continuing improvement in the local macroeconomic environment has seen Australia’s risk trend upgraded.

D&B’s report shows Asian growth is likely to remain much faster than the United States and Europe as continued high levels of unemployment undermine consumer confidence despite demand being supported by continued fiscal and monetary measures in these markets.

On the corporate side, considerable spare capacity in many developed economies could result in a reluctance to invest and take on more workers.

Regardless, conditions have improved markedly from early 2009. Global growth is expected to reach 2.4 percent in 2010, while the US (2 percent), Europe (0.7 percent) and Japan (0.2 percent) will lag behind China (9.8 percent).

‘LOW RISK’ ENVIRONMENT FOR BUSINESS

The Economic & Risk Outlook Report also reveals the latest Country Risk Indicator Rankings, which assess the safety of investing in more than 131 countries globally.

Australia is equal first at DB1d, (the fourth highest possible rating) a ranking which is on par with Canada, Norway and Switzerland.

Positively for this group, economic conditions are expected to continue improving throughout 2010, particularly in Australia and Canada.

D&B Director of Corporate Affairs, Damian Karmelich, says a continuation of improving economic conditions would bode well for Australia’s reputation as one of the safest countries in which to invest.

"Australia has been classified as a low risk environment for business investment, demonstrating the strength of our nation’s economy at a time when the recovery in many other developed nations remains sluggish," Karmelich says.

"However to maintain strong trading relationships and attract foreign investment to our shores, we must at the very minimum, maintain our current rating," he says.

"As the rest of the developed world recovers global competition will intensify. Therefore, we need to ensure our focus on reform, strong economic management and sound risk practices continue."

TRADING NATIONS

Key trading nations for Australia, including the United States, United Kingdom and China are currently rated DB2a, DB2b and DB3d respectively.

These ratings are the 5th, 6th and 11th highest on the County Risk Indicator.

Japan has been downgraded to DB2c and its trend is categorised as deteriorating.

More positively, Korea (South) is one of just five countries to have received a rating upgrade thus far this year – the country is now rated DB2d, the 8th highest possible ranking.

D&B's Economic & Risk Outlook Report states that Australia avoided recession in 2009 and its outlook for 2010 is solid.

With its economic cycle now more closely linked to Asia-Pacific economies than the OECD, Australia should continue to be buoyed by emerging market demand for commodities.

However, a fall in prices is a potential risk. The remaining risk factor is inflation though D&B's CPI inflation forecast for 2010 remains at 2.3 percent.

OUTLOOK

In line with this outlook D&B has raised its previous forecast of 1.8 percent real GDP growth in 2010 to 3.3 percent, though growth is expected to fall back in 2011 to 2.4 percent.

"Dun & Bradstreet has upgraded its country risk trend to improving as the macroeconomic outlook steadily recovers. We have also upgraded the GDP growth forecast for 2010 from 1.8 percent to 3.3 percent," Karmelich says.

"The critical factor now is how Australia’s executives respond to this improving environment. We need to maintain our growth momentum in the quarters ahead if we are to continue to perform well as a nation," he says.

"However, with reduced support from the Government's economic stimulus package and the impact of rising interest rates, the months ahead will continue to pose some challenges for consumers and firms."


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