‘We have to adapt to survive’: Business confidence plummets in NSW

Business confidence in NSW has slumped back to the lows registered during the COVID-19 lockdowns as firms grapple with rising costs, worker shortages and lingering supply chain disruptions.

Despite a near 50-year low in unemployment and resilient consumer spending, a quarterly survey by Business NSW shows sentiment among the state’s business owners deteriorated sharply in the past three months.

Tabitha Zeppieri, owner of Smith Street Traders gift store.Credit:Photo: Wolter Peeters

Confidence was weaker across all the state’s industry sectors and all regions, and expectations for the next quarter were subdued. Capital spending and hiring are both expected to slow in coming months and there is concern about higher interest rates and rising energy prices.

“Business conditions are reportedly tough, with heightened operating cost pressures and reduced sales revenue, both of which adversely impact on profits,” the report said.

The measure of current conditions in the survey’s Business Confidence Index has fallen to be on par with the low registered in mid-2020 soon after the initial onset of the pandemic.

Tabitha Zeppieri, who owns the Smith Street Traders gift shop in Summer Hill, said rising prices had created uncertainty for businesses and consumers.

“Things are a little gloomy at the moment, things are constantly changing. The virus is changing, the economy’s changing, and we’ve all got to find ways to adapt to survive.”

Zeppieri said turnover in her store is still well below pre-COVID levels.

“It’s not surprising that confidence is down given what’s going on with interest rates, petrol prices and other day-to-day living costs,” she said. “Everything has gone up.”

John Risso, who runs a design, advertising and printing business based in western Sydney, said purchasing stock from overseas was taking much longer, and costing far more, than previously.

“A container of paper coming out of Europe used to take six to eight weeks and cost about $2000 a container, but now it’s taking three to four months and costs $14,000 per container in freight,” he said. “You just have to pass those costs on.”

Risso said freight times from China were also much longer than before COVID-19.

Business NSW chief executive Daniel Hunter said businesses were feeling the effects of higher costs and an uncertain economic outlook.

“There is no denying that many families and businesses are feeling the impact of rising interest rates, higher prices and there is some uncertainty at what is around the corner, but the green shoots are there,” he said. “We have more people in work in NSW since records began, well above pre-COVID levels, and businesses are still seeing strong sales in the retail sector. We should be positive that the fundamentals of the NSW economy remain strong. Above all else, we need to avoid talking ourselves into recession.”

Separate measures of consumer confidence have also plunged recently amid surging inflation and rising interest rates. This month’s Westpac-Melbourne Institute Consumer Sentiment Index was on par with the lows reached during the pandemic and the 2009 global financial crisis.

The Reserve Bank forecasts inflation to be around 7.75 per cent over 2022 and has lifted interest rates four times since early May.

Business NSW’s quarterly survey also found the majority of NSW firms favour reforms to property taxation. It showed 62 per cent supported the state government’s plan, announced in the June budget, to provide first home buyers with a choice of paying an annual property tax or upfront stamp duty on properties up to $1.5 million. The same share (62 per cent) supported the scheme being extended to all home buyers.

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