Insurance companies are positive that business conditions will improve in the future, according to the Commonwealth Bank’s Future Business Index, despite a moderate decline in confidence over the last quarter.

Seventy-two per cent of finance and insurance firms are looking forward to improved conditions in 2014. Compared to last quarter, more than twice as many firms (31%) expect domestic demand to drive growth.

Nonetheless, 42% anticipate higher operating costs, potentially limiting profit growth. While 61% expect higher revenues, only 40% say profits will increase.
As a result, organisations are looking to reduce headcount and capital spending.

The proportion of firms concerned over the falling Australian dollar has plummeted from 51% in September to 15% this quarter. A potential economic slump in Asia, however, is still a concern for 51% of firms.

Michael Cant, executive general manager corporate financial services at Commonwealth Bank, said: “Optimism across all businesses is being driven by a number of factors, most notably stronger revenue and profit expectations. Notwithstanding the buoyant sentiment across the mid-market, there remains a level of conservatism as businesses continue to focus on managing costs.”