Around half of all small businesses are delaying investment decisions due to concerns about the impending federal election.
According to new survey results in the Westpac Small Business Report, undertaken in collaboration with Deloitte, 50 per cent of small businesses are worried or uncertain about the impact election policies will have on their operations, and are therefore choosing to delay growth strategies such as investment or staffing.
The major bank has suggested that delays to investment or growth plans could have far-reaching consequences for the economy, given that 40 per cent of new jobs in the economy (equivalent to 107,000 jobs in 2017-18) are created by small businesses each year.
Further, as small businesses invest an average of around $530 million each month, Westpac has suggested that the net effect of the election could reduce overall investment levels for the next two months (until the federal election is held), which would exacerbate an economy that is already experiencing slowing while “drags from the housing downturn [are] expected to intensify”.
However, the report notes that the most profitable businesses are less likely to delay decision-making.
Of this bracket, 56 per cent stated the election does not affect their timing for hiring staff, compared to just 41 per cent of other businesses, while 58 per cent of this group do not consider the election when buying equipment compared to 40 per cent of other businesses.
Speaking of the figures, Ganesh Chandrasekkar, general manager of SME banking at Westpac, said: “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. 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.”
According to the report, small businesses would like to see the federal election result in decreased 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,” Mr Chandrasekkar said.
“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 per cent of small businesses are unaware of what’s available, and almost 80 per cent say the government grant process is too difficult to navigate,” he said.
“If there is one area which we could boost confidence in 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, Mr 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 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.”
The Westpac findings follow on from similar warnings that access to credit for small businesses is expected to be hindered off the back of the banking royal commission.
According to research commissioned by SME lender Scottish Pacific and conducted by East & Partners, which involved a survey of 1,257 of SME owners and senior managers across Australia, one in five SMEs already experienced royal commission-related funding difficulties during 2018.
The survey revealed that 22 per cent of respondents said that tighter credit policies, imposed by lenders amid scrutiny from the royal commission, had made it more difficult to access credit throughout 2018, with 34 per cent expecting funding challenges to intensify.
Reflecting on the research, Scottish Pacific CEO Peter Langham warned that changes adopted in response to commissioner Kenneth Hayne’s final report should not further impede SME access to finance.
Speaking last month, Mr Langham said: “The research shows by far the greatest reason business owners seek new finance is to fund their expansion opportunities. It’s the key reason given by 58 per cent of SMEs,” Mr Langham said.
“So, the easier it is for SMEs to get funds, the stronger the Australian economy will grow.”
He added: “Given recent economic forecasts, all the more reason that governments and the business community must prioritise making it easier, not more difficult, for SMEs to access funds.”
[Related: RC exacerbating SME funding woes]