21 August 2018

We're a confident lot, the business community, still riding a wave of optimism following the March state election and buoyed by government promises yet to be tested.

Our unemployment rate continues to fall and more people are finding full and part-time jobs than anticipated.

But it’s time to take a reality check and look at the actual business conditions we’re facing. In the latest Business SA- William Buck Survey of Business Expectations, confidence has increased 1.2 index points since the March quarter to reach a very positive 116.2. That’s 35 points higher than this time last year, and 26 points higher than a decade ago.

We’re smiling and whistling as we walk to work, nodding hello to passers-by. But the reality kicks in when we unlock the office doors and turn the computer on. The monitor blinks back with a red light announcing that almost 48 per cent of businesses saw their cost of materials go up, and just under 60 per cent saw their overheads rise. Only 4 per cent saw the cost of materials fall, and only 1 per cent saw their overheads drop. Ouch.

General business conditions have fallen 13 points since the last quarter, to 92.5 points. Over the year to June, they’ve remained relatively steady and only fallen .9 points.

That means power and other utilities are still expensive, and the cost of doing business remains high. One business owner told us earlier this month their power costs rose by $60,000. For a small business operator, the increase is crippling.

When it comes to labour costs, almost two thirds expected conditions to become even harder next quarter, with less than 2 per cent anticipating labour costs could fall. We’re a persistent lot, and the markers are showing our business owners are continuing to work extremely hard to be successful. Total sales and revenue were up for 33 per cent of operators, and for 26 per cent profitability was up. Profitability and sales were down for 42 per cent. But we’re persistently optimistic – 37 per cent are expecting to be more profitable next quarter, and 46 per cent expect sales and revenue to rise.

The good news is that export sales are steady for 80 per cent of our respondents. There’s plenty of positivity around, it’s just not translating to the business community post-election.

Business owners are telling us they’re ridiculously busy, but their costs are impinging on their profitability.

We need to see some real results for our businesses, not just promises. South Australia’s business community needs to see real reductions in costs, not just empty forecasts.

We’re still whistling, but the economic headwinds are swirling.

Anthony Penney is Business SA Executive Director, Industry and Government Engagement
Image: More people in work means more people spending in the local economy. Picture: AAP Image/ Brenton Edwards