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Monday, May 10, 2021

Business confidence slumps as JobKeeper winds up

Business confidence in the Hunter and NSW has fallen in the first quarter of 2021, according to the latest study from Business NSW.

The Business Conditions Survey, conducted throughout March as the end of JobKeeper approached, showed that more ventures across NSW viewed the economy as getting weaker (39%) than viewed it as getting stronger (29%).

In the Newcastle and Lake Macquarie statistical region, 37% perceived a worsening of the economy, compared with 27% who believed it was stronger.

Meanwhile, the remainder of the Hunter thought the economy was trending down (34%), contrasted with 27% who saw it as improving.

“This data gives some cause for concern, but is not totally unexpected,” Business Hunter CEO Bob Hawes said.

“Rising costs, the imminent end of JobKeeper and the short-term tightening of restrictions across NSW and other states in late December 2020 are all factors that contributed to the drop in business confidence over the first three months of the year.

“Increased operating costs are a significant drag on business and respondents reported that these were rising across nearly all measures, including wages and staff costs, professional services, finance, marketing and advertising, as well as government taxes, levies and fees.

“A growing number of businesses across NSW are looking to scale back capacity, with 40% prioritising downsizing in the March 2021 quarter compared to 30% in the previous quarter.

“For many businesses, 2021 will be about regrouping and re-establishing their customer base and staff capabilities.”

Mr Hawes said there were some positive indicators from the survey.

Business hiring and investment in the region remained relatively stable over the review period, with a modest lift in the number of businesses across the Hunter indicating they had increased staff numbers in the first quarter of the year.

The survey reinforced the issue of skills shortages in the Hunter, with 50% of businesses in Newcastle and Lake Macquarie and 40% in the rest of the Hunter Valley indicating they were having difficulty finding employees with required skills.

The survey sought specific information about the effects of the pandemic and the end of the JobKeeper wage subsidy program, which finished on 28 March.

While businesses were generally more optimistic about the ongoing impacts of COVID than they had been three months earlier, 44% of those who were receiving JobKeeper expected to have to reduce their workforce when the subsidy ended and half anticipated having to cut working hours for staff.

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