BankSA State Monitor shows business confidence in SA has risen to levels not seen since 2005

SA’s business confidence has surprisingly soared to levels not seen since 2005 – despite the pandemic. Here’s how the state dodged a bullet.

Business and consumer confidence in South Australia is surging across both metropolitan and regional areas, with “genuine optimism” about the state’s future fuelling the positive outlook, BankSA says.

The BankSA State Monitor, to be released widely on Friday, shows that business confidence has hit levels not seen since 2005, while consumer confidence is also at the highest level in more than a decade.

BankSA state general manager business banking David Firth said the comparisons with the early stage of the pandemic, which hit Australia in earnest in March last year, were stark, with the number of housing and business loans now on “deferral” a fraction of what they were.

Instead, businesses were focused on expansion and consumers were spending, with a 32 per cent increase in consumers saying they had made a significant purchase, such as real estate, a car or holiday travel, in the past three months.

Mr Firth said there did not seem to be concerns broadly about the cessation of JobKeeper payments at the end of March and the flow-on effect on spending, although clearly there were sectors such as international travel-focused businesses which were still hurting.

And the positive outlook was broad based, with businesses and consumers in regional areas also optimistic.

“Business at the start (of the pandemic) were looking to reduce costs to ensure sustainability,’’ Mr Firth said.

“Many have now stabilised and some are actually telling us they are finding it really hard to get people with the right skills they need to be able to fulfil sales growth. I didn’t expect that to happen so soon.’’

Mr Firth said with net migration to SA positive now for the first time in many years, there would be a boost to the economy, and areas such as housing construction, which had also been boosted by government stimulus packages, were looking strong.

With SA’s house prices on the move, consumers were likely to be more confident also, and more likely to spend.

“With tight supply and that migration piece, it’s making the residential market pretty competitive,’’ Mr Firth said.

“On the home building front, we’ve got relationships with some of the larger residential builders and their order books are pretty full, so the government has definitely brought forward that activity there.’’

Mr Firth said a trend towards paying down mortgages which was spurred into action by the pandemic continued, but with many homeowners having built more financial security over the past year there was more capacity and confidence to spend which was coming through in the numbers.

The successful state and federal government management of the pandemic was undoubtedly behind that confidence, the bank said.

“And that consumer confidence flows into confidence on the business side,’’ Mr Firth said.

“People are looking forward, thinking that the climate for doing business in SA is going to improve over the next 12 months, and also more businesses over the last three months have looked to employ more people.

“One of the things that really stood out for us this time was that it really is confidence across the board, it’s not just a metro story and in fact confidence is even stronger in regional South Australia.

“It’s not often we see every part of regional South Australia with a positive outlook and we are seeing that this time.’’

Industries which are showing strength include community services, healthcare, manufacturing and agriculture.

A desire to buy locally and also ensure supply chain continuity was likely feeding into the strength of the manufacturing sector, and businesses such as logistics were doing well as consumer trends changed with more online shopping.

Going to the actual numbers, consumer confidence as measured by the survey increased 9.2 points to reach 124.9 points, where 100 is a neutral level, marking the fourth consecutive improvement and its highest level in more than 10 years.

Business confidence increased 4.3 points to 129.9 points to reach its highest level since 2005.

In regional SA consumer confidence grew by 10 points to reach 126.5 points and business confidence increased by 6.4 points to 135.2 points.

The upswing in consumer confidence is being demonstrated in corporate profit reports being released at the moment, with the nation’s biggest listed car retailer Eagers Automotive saying this week that after eight months of declines, the trend in sales swung sharply positive in November.

Also this week Accent Group, which operates the Athlete’s Foot, Trybe and Platypus shoe outlets, said it would open 90 new stores this year, even as online sales surged by two thirds.

The ANZ Stateometer, released on Thursday, forecasts the state’s economy to grow by 0.75 per cent this financial year, before a big jump to 4.25 per cent in 2021-22. This follows a 1.4 per cent contraction in 2019-20.

This year’s growth projection is slightly behind Queensland, in line with Tasmania, ahead of NSW and well ahead of Victoria. WA is the standout with 1.75 per cent growth expected this financial year.

SA won the lottery in the pandemic

Analysis – Cameron England

It seems counterintuitive that the recipe for exuberant confidence across the state’s business and consumer sectors is a continuing global pandemic with no prospect of international travel and the ever-present threat of a snap lockdown.

But confidence, like many things in life, is relative.

The early days of the pandemic, particularly the first couple of weeks of March, were, in a word, terrifying.

Across the nation, we were told to stay in our homes indefinitely, businesses were shut down en masse, and with JobKeeper not yet announced, the prospect of people running out of money to buy basics was a real possibility.

We reacted as you’d expect – we stopped spending and funnelled money into paying off debt. Businesses cut their costs to the bone and some people bought a 10-year supply of toilet paper.

One year later, the overwhelming conversation socially and in business circles in South Australia is: “I can’t believe how lucky we are to live here.’’

Those of us who aren’t working in areas such as tourism can go days without thinking about the pandemic. Life is not “normal”, but the sky has not fallen in.

And with billions of dollars in unspent travel savings burning a hole in our pockets, and some sectors given a nudge by government stimulus, things can start looking pretty good.

It’s like writing off your car but realising you and your friends are all safe. Yeah, it sucks, but you dodged a bullet, so put a smile on your face and go buy a lottery ticket.

SA has already won the lottery – well, maybe the third division. We’re pretty happy about it and looking to build on our luck for a prosperous future.