June 1, 2000	atimes.com

Oceania Australian business confidence plunges in May CANBERRA - The goods and services tax (GST), rising interest rates and the plunging dollar drove Australian business confidence down to the lowest level on record in May. However, the world's leading economic body has revised up its growth forecast for Australia's economy this year, while warning the government to remain vigilant about the new tax. The Yellow Pages Small Business Index found small business confidence at their lowest level since the Index began in May 1993. ''This was the greatest quarterly fall in confidence recorded in the history of the index and followed a quarter in which the numbers of proprietors reporting increased sales and profits also slumped,'' economic adviser to the index, John Marsden said. He said the looming GST was clearly a major reason for the collapse in confidence, but not the only factor. ''Many other factors, including rising interest rates, falls in the dollar and the share market, appear to have contributed to the lowest recorded levels of both proprietors' own business confidence and their outlook on the economy.'' While small business is gloomy about the next 12 months, the Organization for Economic Cooperation and Development (OECD) has sharply revised up its forecast for the economy. Just six months after forecasting growth in 2000 of around 3 percent, the OECD has now revised that up sharply to 3.9 percent, slipping only slightly in 2001 to 3.7 percent. Treasurer Peter Costello said the OECD also forecast further improvements in unemployment to 6.4 percent by 2001, with a pick-up in exports helping to slash the current account deficit. But the report warns the government must remain vigilant about the risk to inflation from the GST. ''The introduction of the GST is likely to raise measured consumer price inflation above the Reserve Bank's (2-3 percent) target by a substantial margin during the second half of 2000 and the first half of 2001,'' it said. The warning is reinforced by the Yellow Pages survey which found nearly half of proprietors plan to increase prices the full 10 percent after the GST begins. A further 5 percent indicated their prices would rise more than 10 percent, despite the government declaring this to be illegal. Small Business Minister Peter Reith admitted small business was apprehensive about the GST, but predicted fears would soon subside once the tax was in place. ''It is a better system, but it will take a little while for people to get to grips with it, understand it and accept it,'' he told ABC radio. Despite this, more than half said they remained in favor of the GST, although two-thirds of small businesses are concerned by its complexity. (Asia Pulse)

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