Published: June 08, 2018

The confidence index in a Business SA-Statewide Super survey of business expectations has surged into positive territory following the change of government at the state election. The index, in which 100 is neutral, rose 16.6 points in the March quarter to 115.

Impressively, confidence is up more than 40 per cent since the middle of last year.

Business SA’s executive director of industry and government engagement Anthony Penney said several elements combined to drive the result, based on survey results collected since mid-April, including positivity about a change of government at the state level and a lack of electricity issues over the summer.

He said he would like to see a further growth in confidence, but increasing costs remained an issue and businesses would need to see the new Liberal State Government “bed down” its business-focused policy announcements.

“For business confidence to be at its highest in eight years is fantastic because what that will mean is that there’s a bit more surety around whether businesses take on an extra person, whether they reinvest in their businesses … the more confident you are, you’re not going to tighten up your purse strings, so to speak,’’ Mr Penney said.

“With some of the policies the new Liberal Government is coming out with, in terms of the reduction in payroll tax for SMEs (small to medium enterprises), that’s going to be very welcomed, and no doubt those pre-election promises would have assisted in boosting confidence.’’

The Government’s policy involves exempting businesses with taxable payrolls of up to $1.5 million from paying any payroll tax, saving those businesses an estimated $44.5 million per year. The policy is expected to come into force from July 1, 2019.

Statewide Super chief investment officer Con Michalakis said the increased confidence should translate into better growth and employment numbers, but the state still needed to address productivity and population growth.

“The proposed independent Productivity Commission and Infrastructure Board should provide a framework and fearless advice to the new State Government to help provide effective infrastructure that will enable an acceleration in productivity in this state,’’ he said in a column in The Advertiser.

“If we can improve productivity we will not only stop the loss of our best and brightest interstate, we may just turn the tide back to this great state of ours.’’

Mr Penney said while the overall picture was positive, profitability was still being squeezed with 31.5 per cent of businesses experiencing a deterioration in this area.

“If that continues it will hamper future confidence,’’ Mr Penney said.

Labour costs were a major issue identified by businesses and Mr Penney said it would be interesting to see whether last week’s decision by the Fair Work Commission to increase the minimum wage by 3.5 per cent had an impact on confidence.

The survey also shows an impressive 79.91 per cent of businesses expect the South Australian economy to perform the same (29.91 per cent), slightly stronger (45.3 per cent) or stronger (4.7 per cent) over the next year.

The overall figure is up from 68.63 per cent for the same survey three months ago.

Actual business conditions were positive at 105 points, but this was down 5.2 points from the December quarter, although 6.8 points higher than for the March quarter last year.

The figure of 105 was less than projected last quarter (109.6), but conditions for next quarter are expected to increase to 114.4.

Across many of the leading indicators surveyed there was optimism that things were looking up, with 44.33 per cent of respondents saying they expected sales revenue to increase, 35.96 per cent saying profitability should trend higher and 26.6 per cent saying they expected to spend more on plant and equipment over the current June quarter.

But costs are expected to rise in tandem, with 44.83 per cent of survey respondents saying they expected the cost of materials to increase and 53.2 per cent saying the cost of overheads generally would increase.

SA’s jobless rate was last reported as 5.6 per cent in March, down from 6.2 per cent in February. This was the third-best result among mainland states and just 0.1 per cent below the national average.

Article by Cameron England, originally appeared in The Advertiser on June 5, 2018

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