Concerns over the income of the upcoming federal election, expected to be held in May, is seeing Australian small businesses delay critical business decisions and potentially limiting job growth and investment, according to Westpac’s latest small business report
Results of the survey conducted in collaboration with Deloitte show 50% of Australian SMEs are worried or uncertain about the impact election policies will have on their operations and are opting choosing to delay decisions such as staffing and investment.
An estimated 40% of new jobs in Australia’s economy are created by small businesses annually; equivalent to 107,000 jobs in 2017-18. Similarly, SMEs invest an average of A$530 million each month, so if the net effect of the election was to delay some proportion of SME investment by two months, overall investment levels could decline for that period.
“This is coming at a delicate moment for the wider economy with growth already slowing and drags from the housing downturn expected to intensify,” the report notes.
However, the report also finds that Australia’s most profitable businesses are less likely to delay decision-making, with 56% stating the election does not affect their timing for hiring staff, against 41% of other businesses; while 58% of this group do not consider the election when buying equipment against 40% of other businesses.
Proactive versus reactive
“With the increasing pace and unpredictability of change this quarter, it's encouraging to see many small businesses adopt a proactive, rather than reactive, approach to decision-making,” commented Ganesh Chandrasekkar, general manager of SME banking at Westpac. “'This is credit to the hard-working business owners across the country, and we can all learn from their example.
“We do appreciate not all businesses will share the same level of confidence, and that is why they’re more cautious and delaying decisions after the federal election. To ensure more small businesses can continue to operate with confidence, Westpac is here to help with an additional A$30 billion available to lend to this sector.”
Asked how the Australian government could best help SMEs, respondents chose lower energy costs, reduced regulation and red tape, and increased small business grants.
“Our customers tell us that small business tax cuts, less regulation and red tape and energy policy are a top priority in the upcoming election,” said Chandrasekkar. “The recently-announced plans to fast track tax cuts for small business will offer some support; but more can be done to help particularly with grant funding.
“There is a significant number of government grants available but over 40% of small businesses are unaware of what’s available and almost 80% say the government grant process is too difficult to navigate. If there is one area in which we could boost confidence it is in the areas of grants - both government and corporate - by easing the burden of compliance and complexity so that businesses receive the benefits.”
Commenting on business conditions in Australia for 2019 Chandrasekkar said: “Looking ahead, the economy is facing a more challenging year with the housing downturn expected to have a more material impact on growth with the Reserve Bank of Australia (RBA) now expected to cut interest rates to cushion the slowdown.
With the Federal Election likely to impact business decisions, 2019 is already shaping up as a trickier year for small business; it will be important we work together with government to ensure they are supported and can continue to operate with certainty.'
Small business advice
Chandrasekkar offers the following tips for Australian SMEs:
Access grants: Significant support for SMEs is available via grants - both government and corporate. Despite this, only 17% of small businesses survey respondents have received a government grant. Check out business.gov.au/assistance/search to better understand what grants are available and how to apply.
Westpac also has several grants available, including the Businesses of Tomorrow program, which is recognising the businesses shaping Australia’s future, and Westpac Foundation’s Social Scale-up Grants for social enterprises that are creating employment pathways for vulnerable Australians.
Working with government: Government expenditure constitutes around 25% of GDP; it is also one of Australia’s largest employers. Working with government can be a good way to grow your business, whether it is through a contract or integrating yourself into their procurement supply chain. With a federal election looming, now is also a great time for SMEs to have their views heard. Contact your local MP about your views, needs and pain points.
Diversify: For better or worse, uncertainty is the new norm. However, there are always opportunities to grow, such as diversifying your operations to access new customers and new sources of revenue to future-proof your business. Consider how your product offering can be differentiated in the market to generate more profits by meeting the increasing needs of new customers, such as the environmentally or community conscious consumer.
Have a strategy for innovation in your business plan: Start with understanding your current innovation performance, then consider collaborating with your stakeholders to generate new ideas to help increase efficiencies and reduce costs. Learn from resources like Westpac’s Davidson Institute free Innovation Toolkit, which helps all Australian businesses follow a simple process to capitalise on opportunities in a changing world.
Have a community mindset: Consumers are increasingly community conscious, so it’s no surprise that Australia’s most profitable SMEs are more community minded and engage in social actions. Consider how this change in customer behaviour can benefit your business and get involved with the community through volunteering, buying local inputs or sourcing materials ethically.