SA conditions catch up with confidence

It has taken a while, but business conditions in South Australia are finally catching up with our improving confidence.

Still buoyant after a change in government earlier this year, owners and operators are starting to see their fortunes slowly turning around, and it’s a wonderful sight to behold.

While confidence is down slightly compared to last quarter – two points to 114.2 – the index is up more than 29 points compared to this time two years ago and almost 17 points over the decade.

That means while current confidence levels are steady, businesses are feeling much better than they were even before the statewide blackout rocked South Australia in 2016. What is most clear in the Business SA – William Buck Survey of Business Expectations is that owners and operators are smiling again. There’s a definite spring in their step.

General business conditions are significantly up – by 11.1 points compared to the June quarter, six points compared to this time last year, and almost 13 points over the decade. The proof of the improvement in conditions is in the economic pudding, and it has been rising in the business operations oven.

While a quick glance at our survey results shows that 53 per cent of respondents found the cost of overheads were up, 44.8 per cent found materials had gone up, and total sales and revenue were down for 30.4 per cent, there’s much more to the story.

If you hark back to the June quarter, it’s evident where the improved conditions are coming from.

The comparison shows businesses expected those conditions to be much worse than they were. They expected to pay much more for their wages, they expected fewer orders, they anticipated their selling price to be lower, and they certainly didn’t think their total sales or revenue to be so high.

People expected the worst, but it looks like they’ve been pleasantly surprised. The great news emerging points to much higher sales and revenue growth, increased profitability, and lower expenditure than anticipated.

In other words, when their income increases and their costs decrease, their business conditions improve.

Other factors have no doubt contributed to the improvement in conditions. The survey came within weeks of a cautious State Budget from a new State Government understandably averse to slashing costs, which was favourable to many businesses.

Emergency Service Levy notices have landed in our letterboxes, with much lower levies than in previous years.

A savings of a few hundred dollars can make a big difference to a struggling business.

What we’re really finding this quarter is that business owners and operators can now eat a slightly bigger slice of their pudding and afford not to feel guilty about it.

And that’s a good thing.

Anthony Penney is executive director, industry and government engagement, at Business SA.

This article was originally published in the South Australian Business Journal on Tuesday 30 October 2018.


 

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