After a much needed few weeks of holidays for many of us, we‘re already back to the reality of life, work, school, and business in 2023.
In this mixed-up world of rising prices, staff and supply shortages, increasing travel, and the impacts of 2020-2021, business sentiment is unsurprisingly somewhat mixed.
On a positive note, businesses are telling us that for the first time in years, the road ahead seems clear, and there’s a growing confidence that we can just get on with it, with the sudden disruptions and surprises of the “Covid lockdown era” behind us.
While we can see further down the road ahead with clarity, however, the view isn’t necessarily a good one.
The costs of doing business are spiralling along with inflation, impacting supplies and other inputs like energy bills.
At the same time, the record shortages of workers and skills have been driving up wage bills. In a small city with a limited pool of labour, businesses compete for talent against one another, the public sector and interstate counterparts. So, while there has been discussion over the past year about real wages keeping pace with inflation, many businesses here in Canberra have been paying increases of 10 to 25 per cent to hire and keep the people they need, and one-off sign on and retention payments are becoming more common.
For small businesses that are focused on looking after consumers, it is a triple whammy. They are experiencing rapidly rising costs, but doing everything they can not to pass those increases onto consumers, drive inflation further, and risk losing customers.
Their customers have less disposable income and less to spend. So, while we may see plenty of people in a shop or restaurant, they might be spending only 70 per cent of what they were a year ago. Retail spend statistics might show healthy spending, but a component of this reflects the significant additional cost of buying the same goods and services.
In February, we experienced the ninth increase to interest rates since May last year. And while attention is understandably focused on the squeeze that higher mortgage payments place on households, businesses are also suffering the cost of rising interest rates through loans on their buildings, capital assets such as machinery, and to cover the ongoing costs of their operations.
When margins are lower for small businesses, that means incomes are down for owners and their families as the costs of living grow and interest rates continue to climb.
There’s no doubt that the road ahead will be challenging. We urge you to remember there are 33,000 local businesses and 63 per cent of our jobs are in the private sector; 97 per cent are small family-owned businesses employing fewer than 20 people.
In Canberra, business matters, and the months ahead are time to show support for the local businesses who looked after our community over the past few difficult years.
