South Australian businesses are riding a wave of confidence, and they have every reason to be optimistic about the state’s future.
We’ve lived through several years in the doldrums with higher unemployment, threatened valley of death for defence and automotive manufacturing closing down. But over the past 12 months we’ve seen a significant upswing.
The June quarter Business SA – William Buck Survey of Business Expectations shows confidence over the past 12 months has grown more than it has over the past decade, which is a very positive sign for our state.
The dramatic increase in confidence over the past year is a reflection of South Australia’s economic lift. The state appears to have turned a fiscal corner. This time last year Holden hadn’t yet closed and people feared unemployment would increase. That hasn’t happened. We’ve had BHP expanding Olympic Dam and Oz Minerals’ Carrapateena announcement and major ship building contracts have been awarded. The French are on our doorstop and the benefits to South Australia will be enormous.
The recent state election result means a fresh stable government. A majority government gives greater certainty to businesses because change can be implemented, provided the upper house respects the government’s mandate.
This time last year we had a State Government talking about introducing a draconian bank tax, arbitrarily applied to an industry which would have passed costs to every mum and dad with a bank account in South Australia. That threatened tax is gone.
On the downside, the survey shows businesses face economic headwinds with high overheads, rising labour costs and increased operating costs. We have a small to medium-sized enterprise sector which is performing stronger than in previous years. Given unemployment is falling, businesses must be employing more people. More people in work means more people spending in the local economy but also puts pressure on wage costs.
While confidence is high, the survey shows businesses now need to turn that confidence into revenue and profit. Confidence is critical because it’s the key driver when it comes to encouraging businesses to invest in their operations, their staff and their infrastructure. We’ve had record-low interest rates for years, which should be the catalyst for businesses to invest in people and infrastructure, but until recently that hasn’t translated.
It’s a good time for businesses to review their business model and work within the current economic framework to improve their position. Margins need to be maintained or improved and cost increases absorbed by productivity and efficiency increases, better procurement practices or increasing prices, or a combination of the above.
My advice is look after your best asset – your people. When unemployment falls, competition for top talent intensifies. Invest in training and conditions to prevent unnecessary turnover. Ensure your staff feel valued and your bottom line will soon look better.