17th January, 2023
New research from MYOB finds a narrow majority of business operators anticipate a recession as costs rise and margins shrink.
For most of 2022, the business media landscape has been focused on rising inflation, increasing interest rates and the growing threat of recession.
In November last year, Deutsche Bank’s Chief Economist Phil O’Donoghue predicted an increase in the unemployment rate by the end of 2023, which he used to justify the firm’s position that Australia’s headed for a recession (even if it doesn’t clear the bar for the definition of a technical recession).
A technical recession is defined as two consecutive quarters of negative economic growth.
Recently, MYOB released the latest findings from its Business Monitor report, showing the recession message has been heard loud and clear by Australia’s small and medium business (SME) community at a time when they face increasing cost pressures.
The survey, including 1,000 SME owners and operators from across the country, took place between 8 November and 5 December last year.
“For the first time since the onset of COVID-19, the pandemic didn’t make the top five pressures facing SMEs,” said MYOB’s General Manager of SME, Emma Fawcett.
“Instead, the main concerns are fuel prices, cost of utilities, interest rates, price margins and profitability, and cashflow.”
Fawcett believes this trend towards prioritising short-term needs may indicate a general lack of confidence impacting the business community.
“Tellingly, these pressures centre on immediate business operations concerns, rather than looking at investment for future scaling or growth.
“It suggests that businesses are focused on the most pressing and current challenges, rather than making bold, confident decisions about the future.”
Despite the pandemic no longer keeping business operators up at night, natural disasters in general continue to be front of mind.
Nationally, 24 percent of respondents said they had been impacted in one way or other as a result of extreme weather events in 2022, where the number rises to 30 percent in New South Wales specifically.
“Australian SMEs are resilient and have made the best of another extremely challenging year,” said Fawcett.
“Lessons taken from the pandemic will hold small business owners in good stead, though it’s likely left many feeling uneasy.
In fact, 65 percent of respondents said the pandemic made them more conservative or cautious in their planning.”
READ: Are recessions bad for business?
However, Fawcett warns against taking an entirely conservative approach to doing business, despite gloomy forecasts.
“The challenge will be how to balance that caution with enough confidence to keep their business thriving.”