The tide is going out on confidence in South Australia, with the March quarter Business SA – William Buck Survey of Business Expectations showing significant declines in confidence, conditions and sales and revenue compared to December.

For the first time since the December 2017 quarter, confidence has fallen into negative territory, dropping 20.5 points from 116.4 to 95.9. Conditions have also fallen significantly, dropping 13.1 points to be well into negative territory on 89.5 points.

More than a third of businesses expected the state’s economy to perform weaker or slightly weaker over the next 12 months, compared to 22 per cent in the December quarter, and only 23 per cent expected it to improve.

Business SA Executive Director of Industry and Government Engagement, Anthony Penney, said businesses were continuing to face higher costs, their wages were still rising and fewer owners and operators were recording an increase in their sales and revenue.

“The perfect storm of poor conditions certainly isn’t helping confidence,” Mr Penney said. “Optimism is near non-existent. Only 14 per cent of respondents expect business conditions to improve by the end of this June quarter, and more businesses think materials and overheads will become even more expensive than previously. Barely any businesses saw costs fall.”

Reflecting uncertainty during the Federal Election campaign, national confidence has fallen 13.6 points since December, and 30.6 points compared to March last year, dipping into negative.

Sales and revenue were down 18.1 points compared to December, now sitting at 91.5 points compared to expectations they would reach 124.5 points. More than 65 per cent of businesses expected real labour costs to again go up, compared to 51.3 per cent last survey, and close to 40 per cent expected unemployment to rise compared to just 27 per cent in December.

“The expected increase in labour costs isn’t surprising given the policies announced by the Federal Labor opposition around the minimum wage, penalty rates, casuals and subsidies for certain sectors.”

He said profitability and sales and revenue had fallen, orders had dropped, and export sales were up for only 8.5 per cent of businesses, compared to 15 per cent in the previous survey.  

“It has been 14 months since the change in government in South Australia. While ESL reductions and payroll tax relief for small business have been welcomed, business owners need to see further relief in the cost of doing business including further payroll tax breaks and utility costs. The new government needs to address these issues.” he said.

William Buck Managing Director Jamie McKeough attributed the fall in confidence to uncertainty, with levels similar to the previous period of political and economic change in late 2017.

“Back then there was uncertainty about defence contracts, the impacts of Holden closing, uncertainty about the new hospital opening, and there was an election coming,” he said. “Now we have uncertainty around (a new government), the banking Royal Commission outcomes, the impact on funding and even drought – which impact the entire economy.”

To view the Business SA – William Buck Survey of Business Expectations results, click here

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16 May 2019