Election Year Politics Cannot Ignore Small Business Trading Conditions

Monday 20th May, 2013

The latest edition of the ACCI Small Business Survey shows that most small business trading conditions have remained below the 50 mark which separates expansion from contraction over the first quarter of 2013, albeit some indicators recording a marginal improvement. Small business expects trading conditions will remain depressed for the June quarter amid rising costs, weak consumer sentiment and a strong currency.

With two million small businesses employing seven million people, lifting the profitability and confidence of small business is absolutely fundamental to economic development, a reality that cannot be ignored in this election-year.

The Survey also found that:

  • While the index of Expected Economic Performance increased 3.7 points to 46.8 in the March quarter, the index has remained 3.2 points below the neutral 50 threshold indicating small business remains pessimistic about the Australian economic growth over the next 12 months;
  • Profit Growth edged up marginally to 36.0 in March, while Selling Prices declined to its new historical low of 43.5, 2.5 points below the low reading of 46.0 previously recorded during the height of the global financial crisis;
  • Wage Growth fell marginally from 59.4 to 59.0 over the March quarter, with the index remaining solidly positive after drifting around the same level over the past six quarters. With the Fair Work Commission minimum wage hearings starting this week, the Commission needs to be aware of the very difficult trading conditions facing small business; and
  • Business Taxes and Government Charges continue to constitute the top barrier to investment for small businesses for the ninth successive quarter in March.

Mr Greg Evans, Chief Economist, Australian Chamber of Commerce and Industry, commented:

"Subdued small business conditions require a concerted effort by policy makers to take cost and regulatory pressure off small business."

"This should start with tomorrow's national wage hearing discounting future wage rises by at least the value of the higher superannuation levy to be paid by small employers from 1st July. Following from that, we need an election-year bidding war between the government and the Opposition on pro small business policy that reduces business costs and red tape."

"ACCI's Small Business Too Big to Ignore campaign (www.toobigtoignore.org.au) has secured 14,500 voices of support in six weeks – sending a compelling message to election-year politicians that small business well-being has become a central election-year issue."

This Survey clearly shows that weak trading conditions have become entrenched for the majority of Australian small businesses. All Survey indicators, with the exception of labour cost, have remained deep in contractionary territory since the global financial crisis, with only a small positive upturn in the late 2009 and early 2010.

"It is alarming that despite small business selling prices are at its 16-year low, labour costs have remained elevated. The lack of pricing power and inability to pass on cost increases have dented small business profits and its ability to employ and invest.

"Despite more positive international economic developments and five official rate cuts since last year, small business conditions and expectations are yet to see signs of significant improvement. It is disappointing that the federal budget revealed last week provided very little relief for small business, but the rate cut was welcome.

"ACCI's Pre-election Survey released two weeks ago set out small business priorities for the next government, including cost and red-tape relief to strengthen faltering profitability."

The Survey assessed business conditions and business confidence amongst 1,607 small businesses around the country over the January, February and March 2013 period.

For Further Information:
ACCI Chief Economist: Greg Evans 0407204559
ACCI Director of Communications: David Turnbull 0419 272 802