Survey shows rising costs hampering Victorian business growth but sales and exports expected to lift

RISING employment costs hampered business trading performance over the June quarter, according to the VECCI - Bank of Melbourne Survey of Business Trends and Prospects released today.

Wages growth was a driver of this rise, as it remained widespread in the June quarter 2015 with a net balance of 18 per cent of respondents reporting an increase. Wages growth is forecast to accelerate in the September quarter 2015, with a net balance of 30 per cent of respondents expecting a rise.

With little change in selling prices and higher operating costs, business profitability was under pressure with a visible weakening in profits over the quarter. A net balance of 18 per cent of businesses reported declines; a 10 percentage point deterioration compared to the previous quarter’s result.

Not surprisingly, the quarterly survey of nearly 500 businesses across seven major industry sectors also found that employment levels were adversely affected by the general weakness in profits and rising cost pressures. Over the June quarter, a net balance of six per cent of surveyed firms reported a decline in employment.

Exports, which had performed strongly in the previous quarter, eased in the current quarter; as did trends in buildings and structures investment. Encouragingly, a rebound in export activity is forecast over the next three months.

Sales, which were relatively flat during the June quarter, are also expected to recover over coming months.

“Cost pressures are an increasing headwind to Victorian business growth,” said VECCI Chief Executive Mark Stone.

“More must be done to reduce the employment cost burden on business by lifting the payroll tax threshold, reducing WorkCover premiums and reforming penalty rate structures.”

Bank of Melbourne Chief Executive Scott Tanner said, “While businesses are still uncertain about conditions in the Victorian economy, there were some encouraging signs for the outlook with confidence emerging.

"Stronger household and business balance sheets, coupled with low interest rates and a weaker Australian dollar, should put growth and investment plans back on the agenda for businesses when the right opportunities arise.”

The outlook for the Victorian economy weakened slightly in the June quarter, with 15 per cent of respondents anticipating improved state economic conditions in the year ahead, compared to 17 per cent in the previous quarter.

The outlook for the Australian economy mirrored results from the previous quarter, with 18 per cent of respondents expecting stronger growth over the next 12 months. 

VECCI & Bank of Melbourne partnership 
VECCI is pleased to partner with Bank of Melbourne. The bank supports VECCI’s quarterly Survey of Business Trends and Prospects, Business Leaders event series and Women in Business event series. The partnership builds on both VECCI’s and the Bank of Melbourne’s mutual goals in supporting businesses in Victoria.

Background – About VECCI
The Victorian Employers' Chamber of Commerce and Industry (VECCI) is the most influential business organisation in Victoria, informing and servicing more than 15,000 members, customers and clients around the state.

www.vecci.org.au

Background – About Bank of Melbourne
Bank of Melbourne is investing in Melbourne and regional Victoria. Since re-launching in July 2011, the bank has tripled its workforce, opened 100 branches and become even more involved in the local community. The bank partners with the organisations and events that matter to Victorians. As a full-service bank, its team of lenders, account executives and industry specialists are supporting Victorian businesses, both large and small.

www.bankofmelbourne.com.au

ends