RDP 2003-01: Business Surveys and Economic Activity 1. Introduction

Business surveys form part of the broad range of information available on the current state of the economy and its short-term prospects. The information contained in surveys relates to various aspects of a firm's operations, such as sales, profits and selling prices. Survey data are released quite quickly and the forward-looking nature of many of the survey questions suggests that they might be useful in providing information on how various aspects of the economy are expected to evolve. On the other hand, survey responses are generally qualitative, rather than quantitative, therefore making interpretation of the results quite difficult. This is particularly the case if the aggregated results, often summarised as a net balance statistic, are volatile.

This paper seeks to establish how the myriad of information contained in the main national business surveys for Australia might be used in a systematic way. Section 2 discusses the advantages and disadvantages of business survey data, and in the process, outlines how the results are aggregated and the issues associated with interpreting these results. Section 3 details the main private sector business surveys for Australia. Section 4 introduces a number of tests which focus on how well the various business survey measures are correlated with series produced by the Australian Bureau of Statistics (ABS), as well as whether survey measures provide any information over and above that which is provided by past values of important economic variables. The results of these tests are detailed in Section 5. Section 6 examines whether business surveys have been useful in predicting turning points for some of the major economic aggregates. Finally, some broad observations on the Australian surveys are presented in Section 7.