A dip in confidence not unexpected.
First and foremost, I feel it’s important to recognise that the June Quarter 2021 results of the Business SA – William Buck Survey of Business Expectations reflect the position of South Australian businesses, as reported by the business community prior to the latest lockdown.
Although I expect that businesses will likely report a further drop in confidence in the September quarter, in light of recent events, we are already seeing business confidence decline as a result of the deteriorating COVID-19 situation we have observed around the country, particularly in late June.
Seeing SA’s confidence index drop by 9.5 points, to 104.5 points, is not surprising with many business owners reporting after three quarters they are seeing no light at the end of the tunnel.
The fall though is not as steep as that felt nationally (down 18.6 points from the last quarter).
Concerns over labour force availability (59% saying it was harder to attract labour in the June quarter) and material cost rises (47% finding it difficult to source necessary inputs, stock and/or materials) appears to be dampening the overall outlook among SMEs. These were significant issues facing business during the 2020/21 financial year.
As Australia’s vaccine rollout continues to struggle to make solid headway, the prospect of open international borders seems further and further away. This is the sure-fire mechanism to alleviate the pressures of effective trade. With this in mind, businesses may need to consider raising their prices to cover growing costs which are to some extent Aan unfortunate result of seeking different and often more expensive supply chains. And of course to help cover the costs of possible future restrictions and lockdowns.
In regard to labour, we are seeing more and more people pursuing careers in security, healthcare and other essential services in fear that they will not be able to work in their previous or current roles during future lockdowns. Scenarios like this are putting adverse pressure on industries deemed higher risk. A double-edged sword for hospitality, tourism, events, and retail which are finding it hard to recruit, often not having the workforce to trade effectively when the opportunities are there during minor restrictions.
A welcome relief for all these industries will be the return of international students, particularly in the CBD. The state government’s plan, which continues to experience setbacks, will result in a small but steady stream of international students returning.
Business SA stated in a recent media release that research shows for every three international students in SA, one job is created. Understanding the fact that workers are reported to be scarce, the additional income generated for businesses touched by international students will still be welcomed.
All in all, for the June Quarter, William Buck – Business SA Survey of Business Expectations demonstrates that we are still a long way away from putting the pandemic behind us. Pleasingly, 57% of respondents indicated they were planning to invest in new plant, equipment and/or machinery over the next 18 months. Businesses need to be exploring all their options with this by activating any mechanism possible to ensure South Australia collectively pursues a swift return to normality.
A new normal may be achieved by business leading the vaccination effort from here on, by encouraging workforces to get vaccinated when it’s their turn or taking advantage of workplace vaccination programs should they come about. Interestingly 64% of businesses said they would be willing to roll out the COVID-19 vaccine in their workplace. I also recommend exploring different export opportunities, particularly in regions likely to be the first to open to international travel.
Businesses should act decisively on implementing a strong workforce by consolidating it based on high performing team members and managing liabilities (such as managing annual leave balances).
The future is bright for South Australian businesses, but there’s some way to go.