Mid-sized businesses optimistic about recovery: KPMG

A KPMG pre-budget survey found mid-sized businesses are optimistic about prospects, even as the pandemic continues.

Respondents were optimistic about their prospects over the next five years.

Medium-sized businesses across Australia are surprisingly upbeat about their future, but are concerned about the withdrawal of government COVID-19 support packages and growing government debt, favouring a GST increase as the best way to reduce it, a KPMG survey has found.

KPMG Enterprise’s annual pre-budget survey of its privately-owned, mid-size client base found that 52 per cent of respondents were optimistic about their prospects over the next five years while only 11 per cent were pessimistic – down from the 17 per cent who had a negative outlook this time last year, before the pandemic.

Less than half of the respondents said the pandemic had a negative impact on their business, while 37 per cent said the impact was neutral and 21 per cent said it had been positive.

More than half of the respondents said the most significant impacts were costs and margin pressures, lower demand and revenue, and shifting consumer spending patterns.

Less than 40 per cent of businesses said they could fully recover within three months of the global pandemic ending and around 30 per cent said it would take more than a year.

The biggest factor impacting businesses confidence was the withdrawal of government support measures for the economy.

With JobKeeper, early superannuation withdrawal, rental code of conducts and temporary changes to insolvency laws set to phase out from the end this year and early next year, 65 per cent said they expected a significant decline in economic activity and an increase in unemployment.

A further 59 per cent said a decline in the property market would impact their business.

Just over half of respondents said their business benefited from government stimulus measures, including 42 per cent who said they benefited from JobKeeper.

KPMG Enterprise partner and national tax leader Clive Bird said it was encouraging to see a high level of optimism from the mid-sized business sector, but noted business leaders were typically self-confident.

“It is notable that respondents were more optimistic about their own business than the wider economy – almost two‑thirds were concerned about the prospects for the economy more generally when the government spending taps inevitably get turned down and finally off,” Mr Bird said.

“A certain degree of innate belief in your own company is necessary for business leaders.”

Mid-sized business leaders also had some ideas about how the government should address the issue of mounting government debt in the upcoming October budget.

Of the survey respondents, 41 per cent said the government should consider raising the GST above its current rate.

A further 40 per cent said the government should focus on reforms that enhance productivity, spurring economic growth.

Only 9 per cent thought the government should actively cut spending, and 1 per cent said they should raise the rate of personal income tax.

Not a single respondent thought the business tax rate should increase.

“No‑one was in favour of direct taxes, which weigh down businesses,” Mr Bird said.

“It is a ticklish issue for policymakers but one which may ultimately have to be reconsidered in these unique circumstances.”