Headwinds a plenty
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You might be feeling exhausted from the challenges of COVID-19, but there’s no rest in sight for Australian small businesses as a host of new headwinds appear on the horizon.
One of them you may not have had to deal with before: the fastest rate of growth in inflation in 20 years.
Australia’s consumer price index (CPI) jumped 5.1 per cent for the year to March, the biggest annual rise since the introduction of the GST.
Escalating inflation is hurting businesses. According to the Australian Bureau of Statistics (ABS), 57 per cent of businesses experienced hikes in their cost of doing business over the three months to April 2022. And, almost a quarter complained that costs had risen to a great extent.
More than four in five businesses reported jumps in the cost of fuel or energy and the products or services they use.
In response to rising prices, businesses say they have had to raise their prices, make changes to their operations and renegotiate payment terms with customers and suppliers.
With inflation on the rise, the Reserve Bank of Australia raised interest rates for the first time in 11 years. Economists expect more increases over the course of this year – ending years of cheap borrowing for SMEs, many of which have outstanding loans and mortgages on their homes.
This change has dropped rather quickly. Many businesses were not necessarily contemplating interest rate hikes. After all, just last year, the RBA was saying it wasn’t going to put up interest rates for a couple of years. Suddenly, that changed.
Added to this are challenges in finding staff at present. The ABS found that one in five businesses (18 per cent) did not have enough staff in April 2022, similar to its findings in January. And, more than four in five businesses with staff shortages were unable to find suitable staff.
Only 36 per cent attributed this to COVID-19 issues, compared to 62 per cent in January.
That said, COVID-19 stopped immigration and shut our borders to migrant or holiday workers.
According to a recent Grattan Institute report, there were about 1.5 million temporary migrants in Australia as of January 2022, compared with almost two million in 2019. It states that people who received a permanent visa after 2000 make up 12 per cent of the Australian workforce. Temporary migrants make up seven per cent of the Australian workforce.
So it’s no surprise that total employment hit a record high of 13.4 million in April and unemployment fell to a low of 3.9 per cent, a rate not seen in decades.
Staff shortages are holding back companies’ ability to operate at full capacity. And, it doesn’t help that they are experiencing supply chain issues at the same time.
According to the ABS, over a third of all businesses reported having supply chain disruptions in February. But that is better than in January when nearly half of all businesses were experiencing them.
Supply chain issues first started because lockdowns prevented people around the world from going to work, but they later spread to transportation issues, particularly the availability of freight services. Worryingly, some experts predict that it will take a year or two to unwind these bottlenecks.
In the meanwhile, supply chain woes are increasing costs and disrupting many businesses. Some have opted to increase their inventories or change their source of supply. Many have written the obituary on the just-in-time system that once enabled efficient manufacturing.
Problems in China have also not helped things much, especially its COVID-related shutdown of Shanghai, China’s most important economic hub and the world’s busiest port.
Not only are the continued strict lockdowns of Chinese cities and towns exacerbating supply chain challenges, but according to S&P Global Ratings, they are hurting Chinese economic activity, leading to weaker growth and economic downgrades.
China’s retail sales fell sharply in April and its industrial production fell by 2.9 per cent from a year earlier. Its jobless rate rose from 5.8 per cent to a two-year high of 6.1 per cent.
And, given that China is Australia's biggest trading partner, a slowdown could have a big effect on our economy.
The bottom line, as the statistics show, is that you are not alone if you are facing business challenges, many of which are likely to stay around for some time.
If you are finding it tough, call us, and see how we can help.
One of them you may not have had to deal with before: the fastest rate of growth in inflation in 20 years.
Australia’s consumer price index (CPI) jumped 5.1 per cent for the year to March, the biggest annual rise since the introduction of the GST.
Escalating inflation is hurting businesses. According to the Australian Bureau of Statistics (ABS), 57 per cent of businesses experienced hikes in their cost of doing business over the three months to April 2022. And, almost a quarter complained that costs had risen to a great extent.
More than four in five businesses reported jumps in the cost of fuel or energy and the products or services they use.
In response to rising prices, businesses say they have had to raise their prices, make changes to their operations and renegotiate payment terms with customers and suppliers.
With inflation on the rise, the Reserve Bank of Australia raised interest rates for the first time in 11 years. Economists expect more increases over the course of this year – ending years of cheap borrowing for SMEs, many of which have outstanding loans and mortgages on their homes.
This change has dropped rather quickly. Many businesses were not necessarily contemplating interest rate hikes. After all, just last year, the RBA was saying it wasn’t going to put up interest rates for a couple of years. Suddenly, that changed.
Added to this are challenges in finding staff at present. The ABS found that one in five businesses (18 per cent) did not have enough staff in April 2022, similar to its findings in January. And, more than four in five businesses with staff shortages were unable to find suitable staff.
Only 36 per cent attributed this to COVID-19 issues, compared to 62 per cent in January.
That said, COVID-19 stopped immigration and shut our borders to migrant or holiday workers.
According to a recent Grattan Institute report, there were about 1.5 million temporary migrants in Australia as of January 2022, compared with almost two million in 2019. It states that people who received a permanent visa after 2000 make up 12 per cent of the Australian workforce. Temporary migrants make up seven per cent of the Australian workforce.
So it’s no surprise that total employment hit a record high of 13.4 million in April and unemployment fell to a low of 3.9 per cent, a rate not seen in decades.
Staff shortages are holding back companies’ ability to operate at full capacity. And, it doesn’t help that they are experiencing supply chain issues at the same time.
According to the ABS, over a third of all businesses reported having supply chain disruptions in February. But that is better than in January when nearly half of all businesses were experiencing them.
Supply chain issues first started because lockdowns prevented people around the world from going to work, but they later spread to transportation issues, particularly the availability of freight services. Worryingly, some experts predict that it will take a year or two to unwind these bottlenecks.
In the meanwhile, supply chain woes are increasing costs and disrupting many businesses. Some have opted to increase their inventories or change their source of supply. Many have written the obituary on the just-in-time system that once enabled efficient manufacturing.
Problems in China have also not helped things much, especially its COVID-related shutdown of Shanghai, China’s most important economic hub and the world’s busiest port.
Not only are the continued strict lockdowns of Chinese cities and towns exacerbating supply chain challenges, but according to S&P Global Ratings, they are hurting Chinese economic activity, leading to weaker growth and economic downgrades.
China’s retail sales fell sharply in April and its industrial production fell by 2.9 per cent from a year earlier. Its jobless rate rose from 5.8 per cent to a two-year high of 6.1 per cent.
And, given that China is Australia's biggest trading partner, a slowdown could have a big effect on our economy.
The bottom line, as the statistics show, is that you are not alone if you are facing business challenges, many of which are likely to stay around for some time.
If you are finding it tough, call us, and see how we can help.
Accrutus Capital Pty Ltd | Level 20 Darling Park, Tower 2, 201 Sussex Street , Sydney, NSW 2001