Weak business confidence continues in persistently challenging environment

By Emma Clarke

The longest sustained period of weak business confidence in 30 years of business sentiment research continued in the June quarter, new Business Chamber Queensland data shows.

Out today, the June 2024 Pulse Report shows business confidence continues to be weak in a persistently challenging business environment where historically high operating costs and a restrictive employment and regulatory environment are having a compounding impact on Queensland businesses.

While economic confidence was weaker only during the Global Financial Crisis and the depths of the COVID economic crisis, both periods recovered quicker than the current weak confidence trend.

Business Chamber Queensland CEO Heidi Cooper says the June data shows the ongoing and sustained challenges for the business community and the need for genuine relief from compounding micro and macro-economic pressures.

“The reality is, it’s really hard to do businesses in Queensland, and it has been for two years now,” Ms Cooper said.

“Businesses are reporting persistent and compounding pressures meaning they’re struggling to manage their business day-to-day. Businesses are facing historically high operating and labour costs, a restrictive employment and regulatory environment, and a tight labour market.

“We’re seeing continually weak sales revenue combined with stable and satisfactory average selling prices, which indicates businesses are not passing on full input cost increase to consumers.”

Labour costs are at historically high levels while four in five businesses reported an increase in operating costs in the June quarter.

“The outcome is businesses are working harder but not seeing the profitability or productivity gains to match,” Ms Cooper said.

Businesses reported labour and operational costs continued to impact general business conditions, which many businesses expect will decline in the September quarter.

A persistently tight and competitive labour market has pushed direct wage costs to the number one constraint on business growth. Retaining and recruiting suitably qualified staff has persisted in the top three constraints on Queensland businesses.

“For more than two years business have been telling us workforce challenges have been among the most significant constraints on their growth and in June we saw that continue,” Ms Cooper said.

“The persistent and ongoing challenges in the current business environment have not been offset by a mild lift in some business conditions we are seeing during this quarter.

“Businesses across the state in all industries and of all sizes continue to report ongoing challenges which are making it hard to survive, let alone thrive.”

Despite a challenging June quarter, businesses reported the recent Paris Olympics renewed their confidence they could benefit from the 2032 Brisbane Olympic and Paralympic Games.

Businesses also reported the upcoming 2024 State Election was an opportunity for genuine policy reform and they expected an alternative vision from the next Queensland Government.

“Businesses tell us they see opportunities ahead in the Queensland economy – and they want to be part of those opportunities,” Ms Cooper said.

“The State’s business community is calling on the next Queensland government to deliver policies and outcomes that improve the business environment, stimulate economic growth and enable the private sector. 

“The 2024 State Election is a golden opportunity for genuine policy reform  – to support businesses to overcome day-to-day pressures, lift weak business confidence trends and enable businesses to participate in future economic opportunities.”

“It is why we have released our Business Blueprint for the upcoming state election which calls on the next Queensland government to deliver policies that improve the business environment, stimulate economic growth and enable the private sector.”

About Pulse

The Pulse report has been measuring Queensland business confidence, sentiment and expectations for more than 30 years. 

It is Queensland’s most established, comprehensive and trusted source of business sentiment.  

Key data

Four in five businesses reported an increase in their operating costs. Insurance, electricity and fuel prices were reported as the highest business input costs.

Direct and indirect wage costs and retaining suitably qualified employees are key constraints on business growth.

Business confidence in the Queensland economy for the next twelve months increased by 2.3 points to 33.4.  The improvement is the largest in the last two years although the index continues to be at a weak level. Business confidence in the Australian economy for the next twelve months decreased but only marginally down 1.9 points to 29.4. The national index is slightly down on this time last year (27.7) but significantly below the 10-year average of 43.3.

General business conditions are now satisfactory after previously registering at weak levels over the previous year. The June quarter index of 42.3 represents a 4.2 points improvement from the March Quarter PBI of 38.1. The June Quarter PBI remains significantly below this time last year (48.8) and also the 10-year average (43.2).

Total sales revenue in the June Quarter improved but remains below 50 indicating weakening sales.

Operating costs during the June quarter were elevated with a PBI of 79.0.  Four in five businesses recorded an increase in their operating costs.

69% of businesses indicated their labour costs increased. The index is well above the 10-year average of 65.1.

Profitability improved but continues to be weighed down with high operational and labour costs.

Average selling prices remain slightly over 50 index points with the PBI up 0.9 points to 53.4 and is consistent with the general trend of sticky but moderate inflation.

Employment levels were virtually unchanged in the June quarter, with the PBI increasing slightly by 0.7 index points from 43.3 in the March quarter to 44.0.

Prevailing weak profit levels, lower sales revenue, higher borrowing costs and uncertainty continue to impact negatively on business capital expenditure.  The capital expenditure PBI in the June quarter fell by another 0.7 index points from 43.5 in the June quarter to 42.8.

Key themes

Inflation and costs: Reduced consumer spending is impacting businesses’ bottom line.

Interest rates: High interest rates have increased residential and business lending costs, and lower consumer and business-to-business spend

Global instability: Geopolitical tensions are impacting Queensland’s linkages with the global economy and our dependency on trade.

Cost of doing business: Reduced revenue means property, energy, fuel, insurance and labour costs are increasingly difficult for businesses to absorb.

Weak consumer and business confidence: Confidence promotes confidence and in the June 2024 case, poor confidence can weigh down appetite to spend and invest.

Poor government support: Business feel they have had do more and contribute more with little to no understanding nor help from government.

Market instability: Volatile markets are causing businesses to put spending and investment decisions on hold.

Skills shortages: The extent of historic skill and labour shortages is clearly evident given it continues to be a key constraint even in a softening labour market and economy.

Olympics and Paralympic Games: Business reported a renewed optimism they could benefit from the Games.

Upcoming state election: Business see the upcoming state election as an opportunity for genuine policy reform and an alternative vision from the next Queensland government.