Survey of Business Expectations reveals productivity stall amid battle for survival

SA businesses are too focused on their battle to stay afloat to invest in measures that improve productivity, according to a SA Business Chamber survey.

South Australian businesses are treading water amid rising costs and ongoing economic uncertainty, according to a South Australian Business Chamber survey, with the profit squeeze preventing owners from investing in new equipment, technologies and other measures to improve productivity.

The South Australian Business Chamber-William Buck Survey of Business Expectations for the June quarter, released on Tuesday, shows business confidence slumped by 8.1 percentage points to 82.9 points, where 100 is a neutral level.

The business conditions index - a measure of businesses’ trading performance - was also well down, falling 4.0 points to 82.7.

Lagging productivity across the state’s business community emerged as a key concern for many local business owners.

The stalemate was underlined by the 57.3 per cent of business owners who reported that productivity within their business was unchanged over the past 12 months, and the 27.7 per cent who said their productivity had deteriorated.

South Australian Business Chamber chief executive Andrew Kay.

South Australian Business Chamber chief executive Andrew Kay said local businesses, particularly smaller businesses, were too focused on their battle to stay afloat to invest in measures that might improve the efficiency of their operations.

“Of those businesses reporting a decline in productivity, struggling to stay profitable was the main issue,” he said.

“For businesses whose productivity was stagnant, the cost of doing business and economic factors were the key concerns. These results are in keeping with what we hear from businesses across the state.

“While operators understand there are areas they should be investing in such as productivity gains, cyber-security or net zero programs, when times are tough the focus can become quite narrow and survival instinct kicks in.”

To ease the cost pressures facing local businesses, the South Australian Business Chamber has been calling for reforms to the state’s payroll tax regime, including increasing the threshold at which businesses must pay the tax and providing regional businesses with a discounted rate.

Half of the respondents to the latest survey called out payroll tax reform as a policy area the state government should pursue in order to boost business productivity - more than any other measure. It was followed by streamlining industrial relations laws, regulation and compliance frameworks.

The slip in the confidence index in June brings to an end three consecutive quarters of improving sentiment across South Australia’s business community, with 17.5 per cent of respondents expecting the state’s economy to be weaker in the upcoming three months, compared to 10.2 per cent from the March survey.

June was the 11th consecutive quarter of SA confidence being below the neutral score of 100, stretching back to December 2021.

Mr Kay said high trading costs, the pressure on profitability and a decline in economic activity were fuelling the negative sentiment. The Survey of Business Expectations’ profitability index is languishing in negative territory, falling a further 2.6 points to 76.4.

“The profitability index of 76.4 points is the lowest recorded since June 2020, or peak Covid,” he said.

“With business costs such as materials, wages, overheads and training all reporting high increases and the economy slowing down, this result is not surprising but should be of great concern to our policymakers.”

EMPLOYEES KEY TO PRODUCTIVITY

Generous working conditions, employee incentives, ongoing training opportunities, and the occasional team lunch are just some of the initiatives keeping productivity high at Barossa Valley business Cooperages 1912.

The subsidiary of fourth-generation, family-owned US group, Independent Stave Company, has been manufacturing and selling premium oak wine barrels and alternatives from its Tanunda cooperage to both Australian and overseas markets for 30 years.

According to managing director Mark Roberts, the key to the business’s longevity has been its stable and dedicated workforce.

“We’re incredibly fortunate to have such a committed team,” he said.

“Their dedication is the backbone of our success.”

Cooperages 1912 managing director Mark Roberts. Picture: Supplied

The latest South Australian Business Chamber-William Buck Survey of Business Expectations for the June quarter reveals that productivity is a top concern for South Australian business owners, with 85 per cent of respondents reporting productivity had either stagnated or declined over the last 12 months.

The survey highlights that staff and skills shortages are seen as the greatest barriers to increased productivity - an issue that Cooperages 1912 has managed to avoid with its 16-person strong workforce.

“Our staff are our greatest asset,” Mr Roberts said.

“Our business thrives on their effectiveness. We’ve implemented strategies that not only boost productivity but also keep our team engaged and motivated.

“It’s a point of pride that our staff retention averages between eight to 12 years.”

While Cooperages 1912 has maintained a strong level of supply to meet demand for its products, seemingly defying the trend faced by many other South Australian businesses, Mr Roberts acknowledged that the company hasn’t been immune to industry-wide challenges.

“Covid-19, supply chain disruptions, and the tariff impacts of the Chinese wine market have all taken their toll,” he admitted.

“The loss of such a key market was a significant blow, but we’ve remained focused on working closely with our customers to deliver exceptional service. This ensures positive word of mouth and helps us continue to expand our customer base.”

With the return of the Chinese market and the post-vintage sales season looming, Mr Roberts is optimistic about the months ahead.

“Business is a balancing act,” he said.

“If we continue to be dynamic, work closely with our customers, and maintain our commitment to quality and sustainability, we’ll continue to trend well in the coming months.”