“Perfect storm” of challenging operating conditions and disaster weakening business profitability » Business Chamber Queensland

“Perfect storm” of challenging operating conditions and disaster weakening business profitability

By Emma Clarke

13/3/2024

Queensland businesses are facing relentlessly challenging operating conditions, fresh off the back of a weak performance quarter with little optimism for the next 12 months.

Latest data from Business Chamber Queensland’s Pulse Survey for the December 2023 quarter shows natural disasters, upcoming local and state elections and a tightening economy fuelled by interest rates and inflation are restricting forward economic confidence in the state and national economies.

It’s among the worst confidence seen in the survey’s history, tracking towards levels seen during the global financial crisis in 2008 and the height of the COVID economic crisis in 2020.

Businesses don’t expect things to improve, with more than half of businesses surveyed anticipating confidence will weaken further in the March 2024 quarter.

Business Chamber Queensland CEO Heidi Cooper said it was a disappointing outcome for the December quarter, a period marked with ongoing day-to-day pressures, macroeconomic challenges and natural disaster.

“Businesses are describing a perfect storm scenario,” Ms Cooper said.

“Inflation, direct and indirect interest rate impacts, recent industrial relations reforms and input cost increases are pinching margins, reducing profitability and impacting business investment.

“At the same time we’re seeing reduced sales revenue combining to create weakening general business conditions.”

Four in five businesses indicated an increase in operating costs, driven through insurance, energy and fuel prices.

Workforce challenges have been the most significant constraint on business growth for the past two years.

“In the December quarter we also saw insurance premium costs in the top three business constraints, reflective of recent natural disasters and cost inflations,” Ms Cooper said.

“Interestingly, we also saw climate conditions and energy costs increase as business constraints, with climate and weather vulnerability at the forefront of our minds during this disaster season, especially in those impacted regions.”

Two in five businesses indicated their sales revenue declined in the December quarter, with close to 40% expecting a further decline in the March quarter.

The profitability index has been declining since early 2021, with a third of businesses reporting their profitability fell again in the December quarter. Three in five businesses said their average selling price didn’t change during the quarter.

“We’re also seeing this impact capital expenditure, with levels falling in the December quarter and expected to decline again in the March quarter. Businesses told us persistent business constraints and high operating costs as well as upcoming local and state elections and ongoing disaster recovery work were impacting their decisions to invest.”

Ms Cooper said while impending elections fuelled business uncertainty, they also set the scene for effective policy reform, and were an opportunity for the state’s business community to ensure their needs were front and centre of government decision making and planning.

“It’s a really important year for Queensland businesses. We know with the right policy setting businesses can be supported to meet day-to-day challenges and plan and invest for their future operations with confidence,” Ms Cooper said.

“We are calling for a series of measures and government investments from reducing regulatory burden and operating and insurance cost relief to support for future workforces.

“Work to secure long-term business success must start now so we have also called for investments across a range of business to business delivered programs designed to support businesses to be resilient, diversified and sustainable now and in the future.”

A business story

David Duncan (pictured) has owned HDR Workshop Solutions, an automotive dealership design and installation company, based in Toowoomba for 34 years.

The business has been a Business Chamber Queensland member for 16 years.

He says workforce challenges, and the increasing pressure on workforce attraction and retention, is impacting the businesses’ ability to meet existing market and customer demand and to grow and scale the business.

The business employs more than 20 people but David says the team is running with 10-15% less team than is needed for the business to run efficiently.

“We’ve had positions open consistently for the last three years,” David said.

“Business confidence is average, it’s been affected by changes in labour laws, workforce challenges and a hold on immigration. We can’t find enough people locally to work for us and the changes to immigration law have made it harder to bring skilled help in from overseas.

“The impact of that is we can’t do the work that’s available to us and we’re letting existing clients down. We’re focused on getting the right people for the job and they are thin on the ground.

“The business will be more that 15% down on turnover simply because we don’t have enough of the right people for the roles, and it means we can’t take on new contracts or grow the business.”

David said recent IR reforms were especially concerning for small businesses.

“Our staff are our family. We want to be able to check in on them, on their mental health and well being, to make sure they’re well and feel supported,” he said.

“I respect the right to disconnect but these new laws make me feel anxious, they’re creating a degree of separation between employer and employee.

“There is an increasing erosion of employers ability to control their business and communicate with their team. Most employers are overwhelmed with the pressure of increasing changes to IR and the red tape of compliance and are trying to do the right thing by their team, while at the same time providing employment and career opportunities for the community.

“They’re all compounding pressures.”

About Pulse

Business Chamber Queensland’s Pulse Survey has measured Queensland business confidence and expectations for more than 20 years.

The survey is the most authoritative, timely and comprehensive snapshot of Queensland business sentiment, providing critical insights into the opinions of business owners across the state.

Pulse includes detailed measurements on employment levels, turnover and business profitability – knowledge that adds a great degree of confidence to the strategic planning and future investment decisions.