21 August 2018

Business confidence is riding a wave of optimism flowing from the South Australian elections - buoyed by promises yet to be tested – but operating conditions are worsening as costs continue to rise.

The Business SA – William Buck Survey of Business Expectations for the June quarter has found that despite the unemployment rate falling and confidence rising 1.2 index points to 116.2, which is the highest it has been since June 2010, general business conditions have dropped 13 points since March.

Business SA Executive Director Industry and Government Engagement, Anthony Penney, said owners and operators are facing rising operating costs such as power and water, the cost of materials is going up, and their overheads are heading north.

“We’re cautiously optimistic as we settle into life under a new government, but businesses are telling us that despite their positivity, the cost of doing business remains high and is not looking like it’s going to improve,” Mr Penney said.

General business conditions have fallen 13 points since the March quarter, down to 92.5 points, and total sales/revenue has also fallen 12.5 points, to 94.1 points.

In the longest running South Australian quarterly business survey, close to 48 per cent saw their cost of materials rise, and overheads rose for just under 60 per cent. Only 4 per cent saw the cost of materials fall and only 1 per cent saw their overheads drop. Profitability was down for 42 per cent, and up for only 26 per cent.

Mr Penney said almost two thirds of respondents expected business conditions to worsen next quarter, with 44 per cent anticipating labour costs to increase and only 2 per cent anticipating a fall.

“The good news is that export sales are steady for 80 per cent of businesses, which is important when considering international markets are vital to the state’s future,” he said.

Business SA has been joined for the June quarter Survey of Business Expectations by chartered accountants and advisers William Buck. As one of South Australia’s largest advisory firms, it understands the needs and challenges faced by the small to medium-sized business community.

Managing director Jamie McKeough said while business confidence had increased more in the past year than it had over the past decade, it was time to turn that confidence into revenue and profit.

“The dramatic increase in confidence over the past 12 months shows that South Australia’s economy has had a significant upswing,” Mr McKeough said.

“This time last year Holden hadn’t closed yet and we feared unemployment would increase. That hasn’t happened. We’ve had BHP expanding Olympic Dam and Oz Minerals’ Carrapateena announcement, major ship building contracts have been awarded and the state election result means a fresh, stable government.”

Mr McKeough said the series of significant economic announcements had lifted confidence, but it needed to now translate into better business conditions and increased profitability.

To view the full range of results, please refer to the accompanying report here

To arrange an interview with Business SA please call Verity Edwards on 0412 678 942. To arrange an interview with Jamie McKeough, please call Jody Heptinstall on 0419 811 760.