SA operators paddling furiously, shows Business SA — William Buck Survey of Business Expectations

On the economic surface, the waters are calm, the sun is shining and the ducks are quacking.

Confidence has hit a post-GFC high in the latest Business SA — William Buck Survey of Business Expectations, but conditions, while strong and steady, are not quite catching up.

The December quarter responses show us that lots of business owners are doing deals, making sales,

taking orders. Total sales and revenue are up for 41.1 per cent of businesses, rising six points, export

sales are up for 15.6 per cent — a rise of 3.3 per cent, and orders received are up for 36.1 per cent, an

increase of close to seven per cent compared to the September quarter. The ducks are kicking

furiously under water to make sure they keep moving.

When you look under the surface at the ducks as they beat to keep afloat, we’re finding the water is

a little murkier than you’d think as well. The figures in the survey are showing us while many of the

economic markers are moving in the right direction, businesses are still facing tough conditions.

Capital expenditure on plant and equipment is the same or increased for close to 98 per cent of

businesses, up from 83 per cent, which means they’re spending more on maintenance or buying

new machines. Capital expenditure on buildings was up, labour costs rose slightly, more businesses

paid overtime, and profitability was roughly the same as the previous quarter.

The average selling price of goods and services was also down for 14.4 per cent of businesses,

compared to only 5 per cent last quarter. Despite sales being up and more orders coming in, owners

and operators are cutting margins and selling their products and services for less.

Those business are still facing the rising costs of power and water, and rates never head south. A

regional engineering firm recently told us their electricity costs had risen 75 per cent over the past

three years. Even though its output had increased and it had taken on more staff to respond to

burgeoning orders, the business was still struggling to turn a profit as margins were squeezed.

South Australia is also looking stronger by the quarter as our interstate counterparts falter.

Confidence in the national economy is still on the positive side of the scale but fell four points. The

eastern states have been battling a housing price slump, political instability with a federal election

fast approaching and a banking Royal Commission.

The economy is slowing nationally with low inflation and low interest rates. South Australian

businesses will need to make sure they keep paddling to avoid the eastern seaboard malaise, stay

positive, and weather tough conditions which hardly look like easing in the near future.

Anthony Penney is Business SA’s executive director, industry and government engagement.