The June quarter Survey of Business Expectations results released today underscore a concern I’ve frequently encountered: South Australia is grappling with a productivity problem.
For years, labour shortages have been a significant issue, hindering businesses from reaching their full potential.
The struggle to find talent with the right skills has stifled productivity, a reality highlighted in our survey, where 85% of businesses reported either stagnant or declining productivity over the past 12 months.
The combination of recruitment difficulties and an economic slowdown driven by inflationary pressures has created barriers to productivity. However, a shift is emerging, particularly among larger companies.
Many businesses with more than 50 employees are adapting by redirecting funds that would have gone towards wages into investments in machinery and infrastructure that enhance efficiencies.
This shift is reflected in our survey, where 32% of respondents indicated plans to invest more heavily in capital equipment within the next year. Among businesses with more than 50 employees, this figure rises to around 43%.
This “do more with less” approach is precisely the kind of initiative that businesses should consider to boost productivity.
I acknowledge such investments are easier said than done, especially for those without substantial financial means. However, for businesses grappling with subpar job applications, this is a critical consideration.
Addressing productivity issues also requires a shift in how we measure business performance. It’s not enough to gauge success purely in terms of dollars. I was alarmed to discover that only 50% of businesses have a method for tracking productivity.
Success is not just about the bottom line; it’s about driving business activity. A robust balance sheet is the dividend of growth in activity, fuelled by a strong business strategy – one built on a commitment to change and progress.
As expected, June results echoed previous quarters, with the cost of doing business remaining the top concern for operators across the state. We have seen the focus on cost pressures while assisting many businesses with their annual budget/forecasting process.
Inflation is squeezing bottom lines, and businesses are looking for guidance on how to navigate this. While I see inflation beginning to moderate, the best advice I can offer – echoing my predecessor Jamie McKeough’s analysis of the March quarter survey – is not to shy away from passing increased costs onto customers.
In many cases passing on price increases can be challenging, but without productivity gains, it is the only way to ensure that business profitability is sustained. There is an art to increasing prices and the communication strategy is critical.
For over 20 years, I’ve had the privilege of advising hundreds of businesses as I have progressed my career at William Buck. Now, as the new Managing Partner, I’m eager to continue this journey by partnering with the South Australian Business Chamber on our quarterly surveys. These insights will guide policy changes aimed at enhancing business conditions across our state.
