The verdict is in, and businesses are struggling. Profitability, as measured by the South Australian Business Chamber in its Survey of Business Expectations for the March quarter of 2025, declined by 15.5 index points to now be 70.1 points (a neutral score is 100). This is the lowest profitability score recorded since the early days of Covid in March 2020.
This outcome coincides with the costs of materials and the cost of overheads rising for more than three quarters of businesses surveyed. With interest rates being relatively high, and disposable income of consumers proving tight, the ability for businesses to pass through those cost increases is minimal, squeezing margins further.
Again, we have seen the prominence of government policies, legislation and compliance increasing. Now it is the second most commonly cited issue facing SA businesses, up from third and fourth in recent surveys. So many of our clients cite the complexity of the award system and payroll complications as a major contributor to time wasted dealing with compliance. Awards covering staff in retail, aged care and the NDIS sectors are especially complex. A more simplified industrial relations landscape should be a priority for lawmakers to improve business conditions going forward.
The survey results also indicate that the jury is out on environmental, social and governance procedures (ESG) in SA businesses. 31.3% of businesses have not implemented any ESG requirements into their operations and a further 17.2% are unsure of their obligations. This is despite mandatory climate reporting coming into effect for many large businesses in recent months. Additionally, just 9.5% of businesses feel that ESG factors play a role in staff retention or recruitment.
The ripple effects of trade uncertainty are making many South Australian businesses apprehensive about their future growth plans, as well as looking to decrease their foreign exchange exposure. 11.8% of businesses said that US tariffs will change their export strategy, and a further 22.8% were unsure. If the risk side of the risk–reward equation increases, many South Australian businesses looking to trade or expand overseas are likely to think twice.
However, there are opportunities for businesses to thrive in uncertainty, especially close to home. Despite cost and profitability pressures, just 11.1% of surveyed businesses said they were not seeking to grow. Businesses’ most common growth strategies involve reaching new customers locally. As well as bringing new products and services to their existing customers in SA and nationally. Large infrastructure projects like AUKUS and T2D will likely create some positive spillover effects for many businesses.
Challenging times can be useful times for many businesses to focus on building the foundations that can help them succeed. Adaptive businesses, from our experience, are guided by a clear, concise strategy that all staff aspire to implement. They have a robust budget that enables them to spot problems early. They’re consciously diversifying into new products, services and markets. Being proactive towards how a business can capitalise on turbulent times can make a significant improvement to business resilience and growth. With those fundamentals in place, now could be a good time to explore new ideas or use challenging conditions as motivation to improve.
