Small business delaying investment decisions

Federal Election to blame.

Australian small businesses are concerned about the impact of the impending Federal Election, delaying critical business decisions which could impact staffing and investment.

A Westpac Small Business Report, in collaboration with Deloitte, revealed that 50% of small businesses are delaying hiring and expenditure decisions until after the election, with uncertainty about the effect election policies might have on their operations.

An estimated 40% of new jobs in the economy are created by small business each year, equivalent to 107,000 jobs in 2017-18, investing on average around $530 million each month.  If the net effect of the election was to delay some proportion of small business 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.

Not all businesses are curtailing activity however with the report showing the most profitable businesses are less likely to delay decision-making, with 56% stating the election does not affect their timing for hiring staff, compared to just 41% other businesses; and 58% of this group do not consider the election when buying equipment compared to 40% of other businesses.

Westpac general manager of SME Banking, Ganesh Chandrasekkar, said with the increasing pace and unpredictability of change this quarter, it was encouraging to see many small businesses adopt a proactive, rather than reactive, approach to decision-making. “We do appreciate not all businesses will share the same level of confidence, and that is why they are more cautious and delaying decisions until after the Federal Election,” he said.

According to the report, the most helpful thing government could do to help small business is decrease energy costs, reduce regulation and red tape, and increase small business grants.

“Our customers tell us that small business tax cuts, less regulation, and energy policy are a top priority in the upcoming election. The recently announced plans to fast track tax cuts for small business offers some support, but more can be done to help, particularly with grant funding,” Chandrasekkar said.

“There are a significant number of government grants available but over 40%of small businesses are unaware of what’s available and almost 80% said the government grant process is too difficult to navigate. If there is one area which we good 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 for 2019, Chandrasekkar said, “Looking ahead, the economy is facing a challenging year with the housing downturn expected to have a more material impact on growth with the RBA now expected to cut interest rates to cushion the slowdown.”

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