Private Aussie firms 'weathering global storm well'

SYDNEY - Australian private companies are weathering the economic downturn remarkably well but many have laid off staff and instigated wage freezes to help stay afloat, a survey has found.

Mid-sized Australian businesses say they are not financially overstretched, have adequate access to credit but believe their greatest risk is a fall in consumer confidence, and a skills shortage in the future, KPMG's annual Private Companies Survey, released today, shows.

KPMG middle market advisory practice partner Don Abell said the results challenged a common perception that the global credit squeeze was strangling Australian businesses.

"This time last year nearly everyone believed it was all doom and gloom ahead," Abell said in a statement.

"The (latest) results suggest that private business is better equipped then we thought to handle any choppy seas ahead and they'll be maintaining a tight ship to do so.

"Private companies are not experiencing a credit-led recession, instead it is consumer sentiment steering their fortunes at the moment."

The majority of respondents (52 per cent) had reported a reduction in employee headcount over the previous six months as a direct result of the economic climate.

Nearly half of all respondents (43 per cent) had put a freeze on salary increases.

Yet for the third year in a row, a skills shortage was reported across all industries. It remained high in mining, manufacturing and utility sectors, showing the traditional trade skills are still in short supply.

The availability and cost of credit was having little or no impact on the activities of well over half (62 per cent) of respondents, the survey found.

The drop in interest rates seemed to give minimal relief due to a consensus that rate cuts were not fully passed on to private company borrowers, the survey also found.

It was agreed that rate drops and the government's stimulus efforts had helped to maintain consumer demand, Abell said.

Abell said many private company executives felt that if there was a credit crunch it was predominantly impacting the big end of town.

The economic downturn was considered to be a sector-related problem, affecting property, construction and manufacturing hardest.

Abell said the results suggested that many private companies had entered the downturn with fewer debts - or with lowly geared balance sheets - compared to public companies.

Forty-two per cent of respondents had cancelled major projects or business expansion plans compared to 15 per cent in 2008, with most of the remainder (57 per cent) putting plans on hold.

The results of the latest KPMG annual survey also confirm a trend in the importance that private companies place on attracting suitably qualified employees, Abell said.

"Interesting to note that despite the downturn, a third of all respondents are still struggling to find appropriately skilled labour," he said.

"This shows that even in the worst of times, the need for skilled people remains."

Some 26 per cent of businesses believe the bottom of the downturn had been reached, albeit with a tough 12 months ahead.

Nearly half (46 per cent) rated the medium-term prospects good or very good.

A further 43 per cent felt prospects in this next three-year period would be average, while 80 per cent said the long-term outlook (five years and beyond) was good or very good.

- AAP