New survey highlights importance of confidence.

A new survey released by the Australian Institute of Company Directors and KPMG has pinpointed the importance of confidence as a factor in our economic future.

The February survey of 550 company directors found that over 50% expected the World economy to deteriorate, well up from 19% in December, and 10% in September.

However the Directors were more positive regarding Australia's position and their own operations, although those in export orientated sectors were understandably the most pessimistic.

Consumer confidence – whether it be at corporate, director or street level – is likely to be a key economic factor in coming months. Anecdotal evidence from the building industry for instance suggests that perception of the future is affecting sales and pricing policy, with discounting re-appearing just as margins were beginning to improve.

If enough people talk the economy down, the effect is likely to become a self fulfilling prophesy, magnifying any eventual downturn. The reality is that there should be sufficient underlying strength to the local economy to weather the Asian storm.