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Construction SMEs are holding off decision making until after the Federal Election

Friday, March 15th, 2019Business, NewsMelanie Basta

Australian small businesses are concerned about the impact of the impending Federal Election and are delaying critical business decisions, which could impact job growth and investment, according to new survey results in the Westpac Small Business Report in collaboration with Deloitte.

The report reveals 50 percent of small businesses are worried or uncertain about the impact election policies will have on their operations and they are choosing to delay decisions such as staffing and investment.

An estimated 40 percent of new jobs in the economy are created by small businesses each year,[1] which is equivalent to 107,000 jobs in 2017-18.[2]  Similarly, small businesses invest an average of around $530 million each month,[3] so if the net effect of the election was to delay some proportion of small business investment by two months, overall investment levels could decline for that period. This is coming at a delicate moment for the wider economy with growth already slowing and drags from the housing downturn expected to intensify.

Not all businesses are curtailing activity though. According to the report, the most profitable businesses are less likely to delay decision-making, with 56 percent stating the election does not affect their timing for hiring staff, compared to just 41 percent of other businesses; and 58 percent of this group do not consider the election when buying equipment compared to 40 percent of other businesses.

“With the increasing pace and unpredictability of change this quarter, it’s encouraging to see many small businesses adopt a proactive, rather than reactive, approach to decision making. This is credit to the hard working business owners across the country, and we can all learn from their example, says Ganesh Chandrasekkar, general manager of SME Banking at Westpac.

“We do appreciate not all businesses will share the same level of confidence, and that is why they’re more cautious and delaying decisions after the Federal Election. To ensure more small businesses can continue to operate with confidence, Westpac is here to help with an additional $30 billion available to lend to this sector,” Chandrasekkar said.

According to the report, the most helpful thing it could do to help small business is decrease energy costs, reduce regulation and red tape, and increase small business grants.

“Our customers tell us that small business tax cuts, less regulation and red tape and energy policy are a top priority in the upcoming election. The recently announced plans to fast track tax cuts for small business will offer some support, but more can be done to help particularly with grant funding,” Chandrasekkar said.

“There is a significant number of government grants available but over 40 percent of small businesses are unaware of what’s available and almost 80 percent say the government grant process is too difficult to navigate. If there is one area which we could boost confidence it is in the areas of grants – both government and corporate – by easing the burden of compliance and complexity so that businesses receive the benefits.”

Commenting on business conditions for 2019, Chandrasekkar said, “Looking ahead, the economy is facing a more challenging year with the housing downturn expected to have a more material impact on growth with the RBA now expected to cut interest rates to cushion the slowdown. With the Federal Election likely to impact business decisions, 2019 is already shaping up as a trickier year for small business. It will be important we work together with government to ensure they are supported and can continue to operate with certainty.”

Construction data findings

Current Climate:

Compared to this time last year;

  • 50 percent of SMEs in construction saw an increase in income from the sale of goods and services, while 48 percent saw an increase (2 percent were unsure).
  • 50 percent saw an increase in the number of people their business employs.
  • 63 percent saw an increase in cost of inputs.
  • 58 percent saw an increase in the number of goods and services offered.
  • 50 percent saw an increase in the number of customers, while 40 percent recorded a decrease (10 percent were unsure). 

2019 Outlook:

In the next year;

  • 56 percent are expecting income from sale of goods and services to increase.
  • One in three (33 percent) are expecting number of employees to increase by 1-9 percent.
  • One in three (37 percent) are expecting the number of goods and services offered to increase by 1-9 percent.
  • One quarter are expecting their customers to increase by 1-9 percent, while one in five (17 percent) are expecting a slight decrease by 1-9 percent.

Social:

  • One in 10 SMEs in construction believe community engagement and social responsibility is not important to customers, while 37 percent say it’s somewhat important, 21 percent say it’s very important and 29 percent say it's extremely important.

Upcoming Election:

  • 37 percent believe their local Federal MP has very little understanding of issues facing them as a small business owner.
  • 27 percent say they are likely to delay buying business equipment until after the election, while 33 percent say the election does not impact their plans.
  • 35 percent say the election does not impact their timing for hiring staff, while 21 percent say they are likely to wait until after the election.
  • 23 percent say they would prefer to move operations offshore after the election, while 17 percent say the election doesn’t influence their decision.
  • 33 percent say they election does not impact the timing to upgrade and introduce new digital systems, while 15 percent say they are likely to wait until after the election and 12 percent would like to act before the election.
  • One quarter (25 percent) say the election does not impact the timing to expand into a new market.

 

[1] Australian Government (2016), Small Business Counts - Small Business in the Australian economy

[2] ABS (2019), 6202.0 - Labour Force, Australia, Jan 2019

[3] ABS (2017), 5625.0 - Private New Capital Expenditure and Expected Expenditure, Australia, May 2017

Image: 123rf's rido © 123rf.com





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