Downward swing for business confidence

Business confidence across Townsville remains positive but has fallen to its lowest level in two years, according to the latest PVW Partners survey. PVW Partners managing partner Carl Valentine said business confidence in Townsville had been incredibly resilient for the last couple of years. However that resilience appeared to be reaching its limits in the face of resource constraints, inflationary pressures, continuing increases in interest rates and a lack of clear direction from the State and Federal Governments on key regional projects. Taken before this week's Federal Budget, survey results produced an index of 3.4 - a 6.7 point drop from the previous quarter’s strong result of 10.1, the largest single period decline since the COVID-19 impacted June 2020 quarter. “While some elements of the index, like employment expectations and training expenditure remained strong, there was a clear weakening in business expectations around sales, consumer demand and capital expenditure for the December 2022 quarter,” Mr Valentine said. “While the past 12 months or so has seen relatively higher levels of expectations around capital expenditure and business growth, this quarter has seen this pullback somewhat, perhaps in reflection of capital projects having been completed over that period or in response to the highest costs to now deliver those projects resulting in a more measured approach going forward." The results indicated that businesses working more closely with the mining sector were less confident than other businesses, he said. The key differences related to sales growth and demand for goods and services from the mining sector. This survey also asked Townsville’s business owners and managers several questions around the impact of rising interest rates. From May to September 2022, the RBA has increased the cash rate target from 0.1 per cent to 2.35 per cent (with a further increase of 0.25 per cent in October 2022 to 2.60 per cent). Lenders have passed on those rate increases increasing the cost of servicing debt. “In good news for our region, 46 per cent of our respondents indicated that the increasing interest rates had thus far had no impact on their business decision-making," Mr Valentine said. "This likely reflects a cohort of businesses with lower, or no, levels of debt and those that are enjoying good trading conditions that has more than offset the higher cost of the debt they have in their business. “Of some concern, 25 per cent of respondents indicated they were focusing on managing other costs in their business to allow for the higher debt servicing costs. "Continuing interest rate hikes could see lower levels of local business expenditure which would magnify the impact throughout our region. “It was pleasing to see that none of our respondents would be cancelling capital projects merely because of the increasing interest rates.” Mr Valentine believed that Townsville businesses would adjust to the evolving economic environment and, despite the December 2022 quarter result, were for the most part looking forward to 2023 and beyond.

Downward swing for business confidence

Industry Queensland

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