Reflecting on the year that was and the year that will be, Chief Minister Andrew Barr recently highlighted the positive economic indicators – of which there are many – to conclude 2018 will be a bumper year.
While the signs are encouraging, and many companies and individuals will have a very happy New Year, the figures can lead us to overlook the fact that there are ACT businesses for whom each day is a battle of survival.
Canberra has the lowest rate of unemployment in the country; tourists are visiting our beautiful city in record numbers; and we have a range of booming local industries: ICT, education, construction, service exports and cyber security.
Yet, business margins, particularly for retail and hospitality businesses, seem to be increasingly tight, with a number of major scalps being claimed in recent months including the iconic Oroton brand which was placed in voluntary administration.
The ACT had the highest rate of business exits in 2015-16, according to the latest numbers from the Australian Bureau of Statistics (ABS).
In its monthly business survey released in November, National Australia Bank found business confidence had not risen due to concerns around household consumption outlook.
Canberra businesses who rely on locals as their main source of custom, need people to spend money at their establishments. Yet consumers are feeling the pinch from low wage growth and cost of living pressures.
The ABS tells us that in the September quarter of 2017, the ACT had the lowest wage growth in the country at 0.5%. This means households will be closely watching their family finances and focusing on necessities.
Just this week, the Australian Chamber of Commerce and Industry unveiled its latest Survey of Industrial Trends, warning that consumer spending continues to be the economy’s weak spot.
Unfortunately, ACT businesses don’t have control over the unusual combination of low inflation and wage growth being seen in Australia, consumer sentiment or household spending. They also cannot influence – or avoid – fixed costs such as water, electricity and increases in rates and rent.
What the current situation means for Canberra businesses is that they are likely to be finding it increasingly difficult to charge a price for their goods and services that account for expenses and still entice buyers.
Therefore, while the local shop may look like it is selling lots of ice-creams, shoes, or toys; volume is not necessarily converting to profitability. For many businesses, it is likely they find themselves in the position of needing to sell more to make the same amount of money they have in the past.
Even those sectors performing strongly such as ICT, education and tourism, have the potential to do even better – and contribute further to local employment and spending – if the Territory can attract more skilled workers.
So, while predictions are that 2018 will be a good year for the ACT economy, we cannot be complacent. The ACT Government must look for ways to reduce cost pressures, address skills shortages and support growth industries; and the community needs to continue to give its support to the local businesses working hard to serve them.