Many companies have released profit downgrades and the soft economy has hit the Aussie dollar.

It's known as confession season - that time of year when companies do their end of year accounts and come clean on any nasty surprises they've uncovered.

As companies prepare their annual and half-year accounts, they update the market on how they're performing if the news is markedly different from what investors had been expecting.

In part it's to comply with the Australian Stock Exchange's continuous rules requiring companies to reveal any "material" information to the market as soon as they have it.

But it's also about getting the bad news out of the way before a company fronts up to the market to deliver its annual or half-year profit announcement a month or two later.


This year we've been hit by a raft of downgrades, by companies including Woolworths, Flight Centre, grocery supplier Metcash, Nine Entertainment and online job site Seek among the better-known names.

Those were back in June. Since then they've been coming thick and fast.

In the past week, health services provider Primary Health Care revised its underlying earnings per share growth to a 5 per cent fall, compared with previous guidance of growth of 5 to 12 per cent. It blamed a reduction in the number of people visiting the doctor, partially due to the effects of a mild flu season.

Miner BHP Billiton wrote down the value of its US shale gas assets by A$2.8 billion ($3.16 billion) and cut capital expenditure as the shale oil division struggled with the low oil price.

Fund manager Perpetual revealed its funds under management - its source of earnings - declined to A$30.2 billion in the June quarter from A$34.7 billion in March. About half the fall was due to weaker markets and the rest due to people withdrawing their investments.

Each of these companies have particular reasons for downgrading their profits, but many are in one way or another the result of Australia's soft economy. Markets aren't performing and consumers are cutting back on visits to the doctor, taking fewer holidays and spending more cautiously at the supermarket.

Australian companies are struggling to find profit growth. For the past couple of years they've driven profits with cost-cutting. Many no longer have any fat to trim.

This year's confession season suggests we're unlikely to see too many impressive earnings jumps in the upcoming profit reporting season.


There won't be much good news to drive the stockmarket higher and investors will have to work a lot harder to find value in the market.

Disneyland off the radar

Things were great for Australian shoppers and overseas travellers back in 2011, when one of our Aussie dollars would buy 1.1 US dollars.

The online camera selling for US$500 - only about A$450 for us. That US$68 children's ticket to Disneyland - just a bit over A$60 for us. Those days are long behind us.

The Aussie dollar hit a six-year low of around US73c last week, as the US Federal Reserve gave its strongest indication yet it would raise interest rates this year. Meanwhile, Australia's economy is stagnant and if interest rates move at all this year, it will be downwards.

The market is expecting this. Investors are selling the Australian dollar and buying the US dollar because they are likely to earn more interest by holding the American currency.

Australians' global purchasing power - measured by gross domestic product per person in US dollars - will fall further during the next two years, according to a report by Deutsche Bank. The purchasing power of Australian households will fall to ninth place this year from fifth last year, when only Luxembourg, Norway, Qatar and Switzerland were higher. By 2017 we'll be in lowly 17th place.

Part of the reason is an expected slide in the Aussie dollar; Deutsche Bank expects it to collapse to US65c in 2016 and then to US60c in 2017.

But there's also subdued economic growth. For the past decade we've been used to economic growth just happening, almost by accident, thanks to the mining boom.

Now we're faced with the prospect of having to make some tough decisions on economic reform to boost our productivity, including more spending on education, improving infrastructure to help business operate more smoothly and changing our mix of taxes. These are all costly or unpopular measures and it's unlikely a government with such poor public standing as Tony Abbott's will be brave enough to undertake any of them.

For the next few years at least, many Australians are going to have the sort of annual holidays that we remember from the 1970s: packing up the station wagon, throwing the kids in the back and driving up the coast to a rented holiday house or camping spot.

It will be a long wait for that next trip to Disneyland.