June Quarter Overview
Queensland business confidence deteriorates but actual performance improves.
Latest results of the June Quarter Pulse Survey indicates an unusual situation of a significant deterioration of business confidence but solid business performance in the June quarter with similar expectations for the September quarter.
Total sales revenue was the stand out positive for the survey with 42% of Queensland businesses indicating their sales and revenue improved during the June quarter. Business feedback revealed that a combination of recovery spend following the floods, recovery spend from COVID-19 especially in the area of tourism coupled with a spending and investment tap turned back on following the federal election have all boosted sales as well as overall general business conditions during the June quarter.
However this is where the good news ends and the sobering news starts. Business confidence has taken a dramatic turn for the worse as a result of a number of compounding issues.
Cost challenges are many and are collectively leading to the erosion of business viability. These issues include:
> Rising wage and labour costs
> Supply chain disruptions which are causing stock shortages and delays in both goods and services
> Rising inflation and cost of goods and services
> Increasing fuel and energy prices.
Accordingly it is unsurprising that both operating costs and labour cost PBIs are at their highest levels on record and are anticipated to remain there for the foreseeable future.
Revenue challenges also clearly evident and include:
> Lack of staff availability including skill and labour shortages
> Lack of availability of affordable accommodation and rental housing
> Interest rate rises that are starting to erode consumer and business spending
> Global economic downturn potentially impacting on Queensland exports
> Reduced consumer confidence and emerging fear of a recession
> Potential threat of foot and mouth disease on Queensland’s rural industry.
As a result and despite improved sales, the profitability PBI did not budge and is actually expected to contract in the September quarter.
In general the above revenue and cost concerns are leading to an expectation of weaker economic growth over the next 12 months for both Queensland and Nationally which is the metric used to measure business confidence. Whilst many of these issues are macroeconomic in their nature they are cascading down to impact businesses at a micro level.