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'Carbon tax could kill us' says Business Survey

Release Date: 23/04/2012

With less than 100 days until the introduction of the world’s biggest Carbon Tax, business conditions in the Illawarra are reaching new lows, with major indicators of sales revenue, exports, profits, employment, investment and finance all slumping relative to the previous quarter, according to the NSW Business Chamber – Commonwealth Bank Business Conditions Survey.

“The message to governments from our survey is that this is the worst time to be increasing the financial and tax burden on businesses in the Illawarra. The message to the Federal Government, in particular, is that for many Illawarra businesses your carbon tax will be the last nail in the coffin,” said Mike Leask, CEO of the Illawarra Business Chamber.

“Electricity bills for small businesses will increase under the tax, further increasing the cost of doing business in Australia. The carbon tax will inevitably impact on business confidence in the Illawarra and simply compound the many challenges that businesses are already facing in making ends meet.”

“It is depressing that it will take the heartbreaking experience of local family businesses closing their doors and laying off staff before the Government realises the huge mistake it has made in adopting its ‘go it alone’ carbon tax policy, which will do little to reduce global emissions.”

Mr Leask said that the results of the survey were further supporting evidence for the Reserve Bank to make a meaningful cut to interest rates at its next meeting in May.

“The case for a cut in interest rates is only growing stronger as the next meeting of the RBA board approaches. Considering that the banks have been moving rates in the wrong direction, and the Federal Government is adding to the burden through imposition of the Carbon Tax, and the increase in superannuation, it’s been left up to the RBA to make positive adjustments to the economy.”

James McIntyre, Senior Economist of the Commonwealth Bank Australia said the most recent reading from the NSW Business Chamber – Commonwealth Bank Business Conditions Survey indicates the difficulties faced across different regions in Australia’s “patchwork economy”.

“Business conditions, and confidence in the economic outlook, both declined in the latest survey. Whilst the Australian economy looks to be posting trend growth overall, courtesy of booming demand in the mining regions, conditions in NSW (along with Victoria, Tasmania and South Australia) remain subdued.

“Surveyed expectations from NSW firms suggest that a further cut in rates may be necessary. We agree. Whilst expectations for business conditions in the quarter ahead did lift, they remain negative, as do profit expectations, hiring intentions and investment outlooks.

“The labour market outlook in particular is key to the outlook for the NSW economy overall, and interest rates. The ABS survey of job vacancies for NSW rose over the three months to February 2012. Jobs growth in NSW accounted for 19,000 out of the bumper 44,000 jobs added in March 2012. Confidence is the key to whether robust job vacancies translate into further actual hires. If they don’t, and confidence in the non-mining economy remains in the doldrums, then the unemployment rate is likely to rise.

The NSW Business Chamber – Commonwealth Bank NSW Business Conditions Survey of Illawarra businesses found:

  • 40% of businesses report that the current performance of the NSW economy was weaker than the previous quarter. This compares with 16% who said it was stronger. The outlook remains negative for the coming quarter with 30% of businesses expecting the economy to weaken further while 22% said it would strengthen;
  • 30% of businesses report that business conditions have declined in the current quarter compared to 17% who reported an improvement in conditions. Expectations for the next quarter are negative with 24% expecting further decline compared to 19% expecting an improvement.
  • 35% of businesses report increased sales this quarter and 33% report a decrease in sales. 39% of businesses expect sales revenue to increase in the coming quarter and 28% expect sales revenue to decrease in the coming quarter;
  • 43% of businesses report deterioration in profitability (compared to 26% who report an improvement). 39% expect a deterioration in profitability in the coming quarter (compared to 32% who expect an improvement); and
  • 36% of businesses report a tightening of access to finance and 31% expect a further tightening in the coming quarter.  
  • 38% of businesses report that the cost of finance has risen and a further 21% believe it will continue to rise in the next quarter.

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