Cost and margin pressures top business concerns: KPMG survey

Cost and margin pressures, the war for talent and cyber security are the top concerns of mid-market businesses, according to a KPMG survey.

KPMG’s latest mid-market pre-budget survey shows businesses are optimistic on growth but worried about cost and margin pressures.

Cost and margin pressures, the war for talent and cyber security are the top concerns of mid-market businesses, with prospects for growth during the cost-of-living crisis a further strain, according to a new survey from KPMG.

While most of Australia’s mid-market businesses remain cautiously optimistic – 80 per cent expect to see growth of at least 2-3 per cent this year and up to 5 per cent further out – the majority believe the higher cost of living is challenging their ability to grow operations and generate demand, the KPMG Enterprise pre-budget pulse check found.

KPMG puts the mid-market as businesses with annual turnover of between $10m and $500m. Most of those surveyed nominated lower interest rates as the key to addressing the drag on demand and growth, while just over a quarter pointed to the upcoming stage 3 tax cuts as making a difference on the growth front.

The number one issue business leaders said would make the biggest difference would be for interest rates to be lower, KPMG Enterprise tax partner Clive Bird told The Australian.

“This really shows that in the mid-market, the view of the economy is that interest rates in particular, as well as cost of living more generally, are having a significant impact on people having to contain spending. That means there’s less demand for goods and services and less of an ability for mid-market businesses to grow,” Mr Bird said.

Ahead of the federal budget next month, business leaders put major tax reform at the top of their wish list, with an increase to the goods and services tax as among the most-nominated revenue raisers.

“Australia is an economy that relies very heavily on salary and wage earners and PAYG tax revenues and, in particular, we lean heavily on high-income earners,” Mr Bird said.

“We’re in a situation now with an ageing population and with a heavy reliance on salary and wage earners, that I think our reliance on income taxes is too significant. And I believe we should look at more tax on consumption. And that necessarily means an increase to the GST.”

The number one issue business leaders said would make the biggest difference would be for interest rates to be lower.

Lifting the GST during a cost-of-living crisis was not likely to go over well with voters but this could be made more palatable by bringing down income taxes, he said.

Even with tax reform and broadening the tax base front of mind as we count down to the budget, business leaders are split on the government’s move to slap an additional 15 per cent tax on superannuation earnings of more than $3m.

All up, 46 per cent do not support the government once again tinkering with retirement savings. And a further 48 per cent said they disagreed with the proposal to tax unrealised gains.

The lack of support was partially due to governments’ past tinkering with the super system, Mr Bird said.

“There’s also a real resistance to taxing unrealised gains. We don’t do that in any other area of our tax system and so to even contemplate taxing unrealised gains in superannuation, most people just think it’s not the right thing to do.”

The KPMG report follows a pre-budget survey conducted by the National Retail Association in March which showed deep concerns among business owners about trading conditions, sales growth, and profitability.

Many of the nation’s retailers remain pessimistic about the year ahead given the burdens of higher wage bills, energy costs and rising insurance premiums and are looking for the federal budget to provide some relief, potentially though energy rebates and addressing the sharp rise in insurance costs.

The NRA called on the Albanese government and Treasurer Jim Chalmers to take these excess pressures off businesses to help withstand what is tipped to be souring consumer confidence in the face of sustained cost-of-living pressures.