There were conflicting messages from the Qantas cuts, and potentially OneSteel yesterday, and from the latest assessment of business confidence and conditions in the latest National Australia Bank survey.
The survey says there has been a small up turn in confidence and conditions, which the media focused on.
The sackings, lower profit and other moves from Qantas, and coming from OneSteel, tells us though that the detail of the NAB’s survey is more accurate than the headline.
OneSteel is reported to be preparing a massive profit dwogrande, like Qantas.
And media reports this morning suggested it was looking for $850 million or thereabouts in new capital.
This raises the prospects of job cuts at its steel businesses in NSW, Victoria and South Australia.
Which is supported by the small print of the NAB survey showing fears of a sharp worsening in the outlook for employment.
The NAB said that the March survey of business conditions and confidence had shown a small, but noticeable improvement:
"The sectors which had led recent declines have in March led the improvement – notably mining, manufacturing and finance & business services. Retail confidence also continues to benefit from prospective Government cash handouts.
"At best the pace of decline in business conditions in March may be stabilising – but at levels that imply further negative growth and are still the worst seen since 1992. Indeed as noted above, every sector in trend terms is still reporting significant further deterioration in activity levels."
"Both trading and profitability improved by 5 points to overall readings of -10 and -12 index points. Against that, employment fell another 2 to -29 points – taking this measure to the lowest level since September 1991."
That would confirm the moves by companies, such as Qantas, to axe staff.
The job losses from Qantas, and possibly OneSteel, our second biggest steelmaker, tell us that’s now the core concern in Australian business.
They are telling us as trading conditions worsen, employment is coming under more pressure.
The scary times of the credit crunch have eased, but the real fear now for business is the gathering downward move of the economy as it slumps into recession.
Figures yesterday from the Australian Bureau of Statistics support the slump in business as lending fell in February.
They confirmed the news from the Reserve Bank’s two weeks ago that there was a much bigger fall in lending to business than expected in February.
The ABS figures backed up that data, showing lending to business dropped by nearly 15% in February, as companies shelved expansions plans.
Total commercial finance commitments dropped 14.7% in February, seasonally adjusted, to $25 billion from $31 billion in January.
"This was driven by a fall in revolving credit commitments – down 25.6%," the ABS said, while fixed loans dropped 7.5%.
The bad news from Qantas won’t be the last from big employers in coming months, and the NAB survey is signalling that with the worst employment outlook in its survey since September 1991.
The Qantas announcement was stunning, more than 1700 jobs to go, including another 500 from management, on top of the 1,000 already being chopped.
Planes will be grounded and sold, profits are forecast to more than halve from $500 million to as low as $100 million for the year to June.
That means the airline will incur a second half operating loss of several hundred million dollars.
OneSteel surprised by asking for its shares to be suspended "pending a further announcement from the company in relation to the company’s financial outlook."
That it couldn’t do what Qantas did an produce a profit update and a series of actions to combat the downturn (it has cut steel output three times this year so far as demand plunges) could mean the company has been surprised by the decline in its financial state and needs to raise cash.
So despite the National Australia Bank finding an "encouraging improvement, for the second month in a row," in business confidence, in its latest survey, the news from the likes of Qantas and OneSteel (potentially), plus other downgrades and job cuts from more companies (Flight centre revealed hundreds of job cuts in Australia last week) is terrible.
Job losses are going to mount: after last week’s surge in jobless to 5.7% (and 200,000 in the first three months of the year), the small improvement in confidence and conditions is a blip.
In fact the jobs situation is worse than it seems as there would appear to have been a rise in march much greater than in previous years where March usually saw a fall in unemployment levels as schools and universities re-opened.
The NAB said "It needs to be stressed that we see no fast recovery in Australian activity.
"That is, the path of growth is more U than V shaped – with recovery not really getting underway till 2010. This shows up most in the financial year forecasts and especially that for 2009/2010.
"As well as the low starting point – including the Survey results for Q1 – we expect exports to fall by around 10% in light of the weak world outlook…."As well as the volume effects, there are also value effects via falling terms of trade. Our forecasts have commodity prices falling by around 28% in 2009 and another 7% in 2010.
"This means the terms of trade in 2009 are likely to fall by a further 25% during 2009 and then marginally (-2%) in 2010.
"We also are very concerned about prospects for both
