Business confidence has fallen in the September 2011 quarter, according to a recent survey from Business SA.

The Business SA Survey of Business Expectations for the September quarter showed that the South Australian confidence index decreased by 4 per cent to 78.2 points.

This fall follows decreases in the previous three quarters and local business confidence has now fallen to its lowest point since March 2007.

The continued decrease in business confidence reflects the concern surrounding the proposed carbon tax, the high value of the Australian dollar, rising costs for businesses and weak consumer confidence.

Business SA Chief Executive Officer, Peter Vaughan, said that the survey results reflected the challenges being felt throughout the business community.

Slowing Economy“The ongoing decline in business confidence is concerning and it confirms the tough economic environment that businesses are operating in,” said Mr Vaughan.

“Low confidence levels throughout the South Australian economy are indicative of the widespread economic uncertainty and it represents the growing divergence between the robust and weakened industry sectors.

“Confidence is at a four year low and businesses are being hit with rising costs, carbon tax uncertainty and very weak consumer confidence.

“The stimulus spending that was previously used to get the economy up and running has now dried up and we are faced with a perfect storm of local, national and international economic challenges.

“The sentiment towards general business conditions also continued to decline in the September quarter, decreasing one per cent to 80 points. This drop in business conditions is at odds with expectations from the June quarter.”

The total sales revenue index increased five per cent to 90 points in the September quarter 2011, and total sales revenue and general business conditions are expected to improve slightly in the next quarter.

Mr Vaughan highlighted that ongoing speculation surrounding interest rate levels continued to restrict confidence.

“While almost half of businesses expected interest rates to remain on hold in the next quarter, it was essential that the Reserve Bank cuts interest rates to get shoppers out and spending before Christmas,” said Mr Vaughan.

“Consumers need an increase in confidence and the interest rate cut will provide a much needed boost to the economy at what is a very important time of year.

Mr Vaughan said that the expectation from business is that labour costs will continue to rise.

“A very large proportion of respondents expect labour costs to increase in the next quarter, and these costs are expected to be spread across wages and other associated labour costs,” Mr Vaughan said.

Markets pointing down“Just over 30 per cent of respondents found skilled labour harder to source than the previous quarter, and despite approaching the Christmas trading period, almost 65 per cent of businesses expect the unemployment rate to increase in the December quarter.

“While this is a concerning outlook, the majority of respondents expect their own headcount to remain stable in the upcoming quarter.

“Indications are that overhead costs will again increase, with more than 40 per cent of businesses expecting material costs to rise in the next quarter.”

One third of survey participants expect their export sales to decrease in the December quarter, while more than 40 per cent of businesses expect the value of the Australian dollar to decrease.

Impacts on business: The September quarter 2011 survey asked about the impact of Local Government responsibility and regulations on business operations. Respondents were also asked about the deregulation of shop trading hours in South Australia.

The majority of survey respondents indicated that Local Government regulations have either a negative (39.5%) or no effect (39.4%) on their business operations.

When respondents were asked to highlight their primary area of concern with Local Government responsibility and regulation, 27% of businesses said building and construction, 20% indicated infrastructure and roads (such as maintenance) and over 18% suggested planning and land use.

“Businesses indicated that fees and charges and timeliness of decision making are the aspects of Local Government regulation of greatest concern,” Mr Vaughan said.

63% of survey participants support the total deregulation of shop trading hours in South Australia and notably three quarters of businesses were in favour of shops being open on public holidays (excluding Christmas and the morning of Anzac Day).

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