As COVID-19 clears, significant business challenges remain

At the end of the COVID-19 tunnel, there is a light as we see some real optimism returning in the March quarter of the Business SA William Buck Survey of Business Expectations. Businesses have made up much of the ground lost in the last quarter. We see this through an 18pt boost of confidence from the December quarter and conditions up 7pts.

But this light we see for COVID-19 is not quite there for other significant issues facing businesses. These issues include supply-side challenges such as our often-spoken labour shortages, rising labour, fuel, logistics and materials costs, and supply chain availability. These continue to create difficulties for South Australian business owners.

Nearly 60 per cent of businesses found it harder to source labour in the March quarter, and both the cost of materials and overheads increased. We continued to see significantly high overtime levels in the March quarter as 83% of businesses covered staff shortages and absenteeism from COVID-19 rules, placing more pressure on workforces.

On the demand side, particularly in the CBD and for those businesses in tourism, hospitality and events, there is the question being asked ‘where are my customers?’. This is slowly resolving itself, with more and more workers returning to the city and the socialising that our businesses in those sectors are used to.

This quarter, only 17% of businesses were not impacted by staff catching COVID-19 or being confirmed as close contacts. This has a staggering impact on the ability of businesses to do what they do best. Seventy one per cent of businesses estimated that they had lost up to 20% of their workdays due to staff having COVID-19 or being close contacts.

On a positive note, we seem to have moved away from the noticeably angry business sector in the December quarter results. Rightly so, though, as business owners struggled with the unexpected restrictions and shifting goal posts as we began living with COVID-19. The March quarter shows us that there are lingering COVID-19 concerns going forward, but this is no longer the dominant concern.

We are left with significant challenges, though, not ones that can be solved overnight. In the March quarter, business owners welcomed the decisiveness of the new Malinauskas Labor Government, and they appreciated that they had been listened to when it came to relaxing the restrictions. But business is looking for more from our new state leaders in labour related areas such as reducing payroll tax, incentivising employment, and increasing training. They are also calling for reduced red tape, and increased local procurement by the state government.

This quarter, two items stood out, one being a real opportunity to increase skilled migration. Businesses have called on government to make it easier to bring skilled migrants into South Australia. They have a critical role to play in correcting the current skills mismatch that we have here in South Australia and the labour shortages.

The second stand out item is a careful caution about government spending. In the current climate where skills are short, too much public spending will result in competition for those scarce skills, potentially to the detriment of the private sector.

To read the full report, please click here.

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By Jamie McKeough, Chair and Managing Director

Jamie is the Managing Director in South Australia and Chair of the William Buck Board of Directors. Jamie provides business and financial management, tax and accounting advice to clients across many different industries. His key strengths are in problem solving and understanding business models and the key drivers of business.

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