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SA businesses feeling buoyant in rough seas

Business confidence in South Australia’s economy has hit a record high, according to the latest results of the annual BDO SA State Business Survey.

Oct 25, 2021, updated Oct 25, 2021

When asked if they had confidence in the ability of the state economy to support their growth, 74 per cent of businesses replied ‘yes’ – the highest rate since the survey started in 2014.

Interestingly, the figure has leapt upwards in both 2020 and 2021 – increasing from just 20 per cent in pre-covid 2019.

BDO Corporate Finance Partner David Fechner attributes this pandemic-era surge in confidence to South Australia’s relatively good position.

“We’ve really had limited impact when compared to other states, such as Victoria and New South Wales, or other countries around the world,” he said.

“Businesses appear to be happy with our economic position and have confidence that we will continue to perform well.”

“Of course, this confidence and optimism is largely dependent on the industry your business operates in. Respondents from the Hospitality, Leisure and Tourism sector, for example, reported far lower rates than many others.”

Manufacturing, Agribusiness and Not-for-profit sectors showed particularly high rates of confidence, with 100 per cent, 75 per cent and 71 per cent respectively.

Fechner says it’s likely that increased consumer demand is helping boost confidence in the Agribusiness and manufacturing sectors, driven by COVID incentives and lack of ability to travel overseas – diverting funds into the local economy.

He says there has been a renewed focus on local manufacturing, brought on by global supply chain issues and a renewed focus on sovereign capabilities to produce certain goods.

BDO AgTech Associate Director Michael Macolino says high agricultural commodity prices and favourable weather conditions have led to higher levels of confidence across some Agricultural sectors.

“However, this has been offset by labour constraints and export challenges in the horticulture and viticulture sectors,” he said.

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“The technology and startup sector in SA is hitting its stride, centred around the growing Lot Fourteen precinct in the CBD.

“With Google and Amazon agreeing to set up offices in Adelaide there is a real sense that the state’s tech sector is growing up, attracting talent from interstate which brings new capital and thinking to South Australia.”

The general buoyancy among respondents was further reflected in the belief that South Australia is a low-cost place to do business, with 66 per cent saying they believed this to be the case.

As one respondent from the agribusiness sector put it, SA “is a fabulous state that provides fantastic opportunities for those that are prepared to engage with them”.

Others were less glowing in their assessment, including this respondent from the Tourism, Leisure and Hospitality sector: “The increasing burden of red tape on employers is getting to the point where many would question whether it is worth trying to run a business.”

Looking to the year ahead, 65 per cent of respondents are anticipating an increase in turnover and 51 per cent an increase in profit – both up on 2020 results.

“Business had less certainty about the year ahead when we surveyed in 2020, but it would seem that coming through the past year better than any of us had hoped combined with the likelihood of borders re-opening is giving cause for confidence”, says Fechner.

The comprehensive 2021 BDO SA State Business Survey results report will be available soon. In the meantime, you can register to receive your copy and view past year’s reports here.

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