Business Conditions and Sentiments

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Insights into Australian business conditions and sentiments.

Reference period

May 2022

Released

26/05/2022

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Key statistics

Over a third of all businesses (38%) expect to increase their prices by more than usual. This was similar to March 2022 (39%).
Nearly half (48%) of all businesses have no plans to increase their price of goods or services over the next three months.
Almost one in five businesses (18%) have planned capital expenditure over the next 3 months.

The May collection was conducted through a telephone based survey between 11 May and 18 May.

In responding to the survey, businesses are asked to provide a best estimate only, without accessing records or reports.

Business size categories used in this release:

Small (0-19 persons employed);
Medium (20-199 persons employed); and
Large (200 or more persons employed).

For information on survey sample, response rates and the questionnaire, see Methodology.

Price of goods and services

Businesses provided information about how they expected the price of their goods or services sold to change over the next three months. This information was last collected in March 2022.

Overall, 38% of all businesses expected the price of their goods or services to increase over the next three months, whilst 48% expected no increase to their prices. These expectations are consistent with March 2022.

Of the 38% of businesses that expect to increase their prices, the majority indicated increases to the costs of products or services used by the business (92%) and rising fuel or energy prices (78%) were the main contributing factors.

Of the 48% of businesses that expect no increase to their prices, almost half indicated that the reason for not increasing prices were to retain customers (46%) and having fixed price contracts (46%).

Image

Whether businesses expect their prices to increase over the next three months

Description

38% of businesses expect their prices will increase over the next three months Factors contributing to price increases(b)(c) 92% Cost of products or services 78% Cost of fuel and / or energy 50% Other business overheads 38% Staff costs(e) 37% Customer demand 25% Cost of finance (interest rates) 25% Cost of finance (interest rates) 48% of businesses expect their prices will not increase over the next three months Reasons for not increasing prices(b)(d) 46% To retain customers 46% Fixed-price contracts 39% Not practical to change prices e.g. due to advertising 23% Business turnover increasing in line with costs (a) Proportions are of all businesses. (b) Businesses could select more than one response. (c) Proportions are of businesses that expect their prices to increase over the next three months. (d) Proportions are of businesses that expect their prices will remain unchanged or decrease over the next three months. (e) Includes staff wages or salaries, overtime, or other staff related costs.

More than half of all businesses in Manufacturing (58%), Construction (58%), Wholesale trade (57%) and Accommodation and food services (54%) expect increases in the price of their goods and services over the next three months.

The results also showed expected price increases for some industries eased compared to March 2022, including Retail trade (59% to 32%), Financial and insurance services (33% to 15%), Transport, postal and warehousing (47% to 31%) and Electricity, gas, water and waste services (54% to 40%).

Businesses expecting their price of goods or services to increase over the next three months, by industry (a)(b)
	May 2022	March 2022
Manufacturing	58	55
Construction	58	58
Wholesale Trade	57	53
Accommodation and Food Services	54	47
Electricity, Gas, Water and Waste Services	40	54
Professional, Scientific and Technical Services	37	25
Administrative and Support Services	36	25
Other Services (b)	35	30
Retail Trade	32	59
Transport, Postal and Warehousing	31	47
Health Care and Social Assistance	24	14
Education and Training	17	20
Information Media and Telecommunications	15	16
Financial and Insurance Services	15	33
Rental, Hiring and Real Estate Services	13	19
Arts and Recreation Services	13	20
Mining	13	27

Businesses expecting their price of goods or services to increase over the next three months, by industry (a)(b)

["","May 2022","March 2022"]

[["Manufacturing","Construction","Wholesale Trade","Accommodation and Food Services","Electricity, Gas, Water and Waste Services","Professional, Scientific and Technical Services","Administrative and Support Services","Other Services (b)","Retail Trade","Transport, Postal and Warehousing","Health Care and Social Assistance","Education and Training","Information Media and Telecommunications","Financial and Insurance Services","Rental, Hiring and Real Estate Services","Arts and Recreation Services","Mining"],[[58],[58],[57],[54],[40],[37],[36],[35],[32],[31],[24],[17],[15],[15],[13],[13],[13]],[[55],[58],[53],[47],[54],[25],[25],[30],[59],[47],[14],[20],[16],[33],[19],[20],[27]]]

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(a) Proportions are of all businesses.
(b) Includes repair and maintenance, personal (e.g. hairdressers) and other services.

Of the businesses that did not expect their prices to increase over the next three months, the main factors varied across small, medium and large businesses.

Reasons businesses do not expect the price of goods or services sold to increase more than normal, by employment size (a)(b)
	Small businesses	Medium businesses	Large businesses
To retain customers	46	50	43
The business has fixed-price contracts	45	53	59
It is not practical to change prices	39	41	39
Business turnover is increasing in line with cost increases	23	27	32

Reasons businesses do not expect the price of goods or services sold to increase more than normal, by employment size (a)(b)

["","Small businesses","Medium businesses","Large businesses"]

[["To retain customers","The business has fixed-price contracts","It is not practical to change prices","Business turnover is increasing in line with cost increases"],[[46],[45],[39],[23]],[[50],[53],[41],[27]],[[43],[59],[39],[32]]]

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(a) Proportions are of businesses that do not expect the price of their goods or services sold to increase more than normal over the next three months.
(b) Businesses could provide more than one response to the question.

Changes in operating expenses

Businesses provided information on how their operating expenses had changed over the last month and expected changes for the next month.

In May 2022, 43% of businesses experienced increases in their operating expenses over the previous month compared to 22% of businesses in May 2021.

When considering the month ahead, 34% of businesses expect operating expenses to increase. The proportion of businesses reporting increases in operating expenses for the past month remains at the highest levels since the survey question was first asked in July 2020.

Businesses commented that increases in general costs, fuel, materials and wages were reasons for increased operating expenses over the past month.

Increase in operating expenses, actual and expected (a)(d)
	Businesses reported an increase in operating expenses (b)	Businesses expected an increase in operating expenses (c)
Jul-20	23
Aug-20	22	18
Sep-20	24	16
Oct-20	24	17
Nov-20	18	18
Dec-20	24	21
Jan-21	21	16
Feb-21	22	20
Mar-21	24	20
Apr-21	27	20
May-21	22	19
Jun-21	21	20
Jul-21		21
Jan-22	31
Feb-22	36	26
Mar-22	40	23
Apr-22	42	35
May-22	43	31
Jun-22		34

Increase in operating expenses, actual and expected (a)(d)

["","Businesses reported an increase in operating expenses (b)","Businesses expected an increase in operating expenses (c)"]

[["Jul-20","Aug-20","Sep-20","Oct-20","Nov-20","Dec-20","Jan-21","Feb-21","Mar-21","Apr-21","May-21","Jun-21","Jul-21","Jan-22","Feb-22","Mar-22","Apr-22","May-22","Jun-22"],[[23],[22],[24],[24],[18],[24],[21],[22],[24],[27],[22],[21],[null],[31],[36],[40],[42],[43],[null]],[[null],[18],[16],[17],[18],[21],[16],[20],[20],[20],[19],[20],[21],[null],[26],[23],[35],[31],[34]]]

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(a) Proportions are of all businesses.
(b) Businesses reported changes over the last month.
(c) Expectations for the indicated month as reported by businesses in the previous month of collection.
(d) The Survey of Business Conditions and Sentiments was not conducted between July 2021 to December 2021 (inclusive).

Changes in revenue

Businesses provided information about changes in revenue over the last month and expected changes over the next month.

The proportion of businesses reporting an increase in revenue over the past month has decreased to 14% compared to 19% of businesses in April 2022 and 17% in May 2021. Looking at the month ahead 17% of all businesses expected an increase in revenue which is less than May 2021 (20%).

In responding, businesses were able to provide additional comments. Most businesses attributed general increases in demand and business activity as reasons for current and expected increases in revenue.

Increase in revenue, actual and expected (a)(d)
	Businesses reported an increase in revenue (b)	Businesses expected an increase in revenue (c)
Jul-20	16
Aug-20	16	11
Sep-20	13	9
Oct-20	16	14
Nov-20	24	18
Dec-20	25	25
Jan-21	20	22
Feb-21	17	27
Mar-21	16	23
Apr-21	22	23
May-21	17	21
Jun-21	13	20
Jul-21		18
Jan-22	11
Feb-22	15	26
Mar-22	13	23
Apr-22	19	16
May-22	14	21
Jun-22		17

Increase in revenue, actual and expected (a)(d)

["","Businesses reported an increase in revenue (b)","Businesses expected an increase in revenue (c)"]

[["Jul-20","Aug-20","Sep-20","Oct-20","Nov-20","Dec-20","Jan-21","Feb-21","Mar-21","Apr-21","May-21","Jun-21","Jul-21","Jan-22","Feb-22","Mar-22","Apr-22","May-22","Jun-22"],[[16],[16],[13],[16],[24],[25],[20],[17],[16],[22],[17],[13],[null],[11],[15],[13],[19],[14],[null]],[[null],[11],[9],[14],[18],[25],[22],[27],[23],[23],[21],[20],[18],[null],[26],[23],[16],[21],[17]]]

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Planned capital expenditure

Businesses reported on whether they have capital expenditure plans for the next three months and factors influencing future capital expenditure plans.

Capital expenditure refers to acquisition of new or used assets e.g. vehicles, machinery and equipment, buildings and other structures.

Businesses that reported planned capital expenditure over the next three months provided information about whether the planned expenditure was higher, the same or lower than what is usual for this time of year.

Of the 18% of businesses that have planned capital expenditure over the next three months, 80% expect it to be the same or more than what is usual for this time of year.

Planned capital expenditure over the next three months (a)
	Higher than usual	Same as usual	Lower than usual	Don't know
May 2021	59	31	3	8
May 2022	48	32	8	12

Planned capital expenditure over the next three months (a)

["","Higher than usual","Same as usual","Lower than usual","Don't know"]

[["May 2021","May 2022"],[[59],[48]],[[31],[32]],[[3],[8]],[[8],[12]]]

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(a) Proportions are of businesses with capital expenditure plans over the next three months.

For planned capital expenditure by employment size, large businesses (58%) were more likely to have planned capital expenditure over the next three months than medium (38%) and small businesses (17%). However, small and medium businesses were more likely to have higher than usual planned expenditure (50% and 39%) than large businesses (25%).

Capital expenditure plans over the next three months, by employment size (a)(c)
	Higher than usual	Same as usual	Lower than usual	Don't know
Small Businesses - 17% have capital expenditure plans (b)	50	30	8	12
Medium Businesses - 38% have capital expenditure plans (b)	39	44	5	11
Large Businesses - 58% have capital expenditure plans (b)	25	55	5	14

Capital expenditure plans over the next three months, by employment size (a)(c)

["","Higher than usual","Same as usual","Lower than usual","Don't know"]

[["Small Businesses - 17% have capital expenditure plans (b)","Medium Businesses - 38% have capital expenditure plans (b)","Large Businesses - 58% have capital expenditure plans (b)"],[[50],[39],[25]],[[30],[44],[55]],[[8],[5],[5]],[[12],[11],[14]]]

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(a) Proportions are of businesses with capital expenditure plans over the next three months.
(b) Proportions are of all businesses.
(c) The sum of the components may not equal 100% due to rounding.

Factors influencing future capital expenditure plans

Businesses indicated which factors had significantly influenced their planned capital expenditure for the next three months. Businesses were also asked this question in November 2020, February 2021 and May 2021.

For all businesses, the most common factors influencing capital expenditure plans were future economic uncertainty (25%), supply chain disruptions (23%) and costs of doing business (20%).

Image

Description

Factors significantly influencing future capital expenditure (a)(b) External conditions - Future economic uncertainty 25%, Cost of doing business(c) 20%, Supply and demand factors - Supply chain disruptions 23%, Demand for products and services Government support - Tax incentives for investment(e) 7%, Other government support(d) 4% Financial factors - Access to own funds 16%, Access to external finance 6% (a) Proportions are of all businesses. (b) Businesses could provide more than one response to the question. (c) Operating costs including staff related costs. (d) For example, SME Recovery Loan Scheme. (e) For example, Temporary Full Expensing, Loss Carry Back tax offset.

Funds sought by business

Just under one in ten businesses (9%) sought additional funds over the past three months. This is less than February 2022 (12%) but consistent with May 2021 (8%). By employment size:

8% of small businesses,
15% medium businesses, and;
15% of large businesses sought additional funds over the past three months.

Reasons for not seeking additional funds

Almost nine in ten (86%) businesses had not sought additional funds over the past three months. These businesses provided information about why they had not sought funds. The most common reason was that the business had sufficient funds which was consistently 90% or greater across small, medium and large businesses.

Reasons for not seeking additional funds, by employment size (a)(b)
	Small businesses	Medium businesses	Large businesses
Had sufficient funds	91	92	90
Had no requirements for capital expenditure or other investments	56	46	47
Unwilling to increase debt	49	33	29
Could not meet debt repayments	6	2	2
Unable to meet eligibility requirements	5	3	3

Reasons for not seeking additional funds, by employment size (a)(b)

["","Small businesses","Medium businesses","Large businesses"]

[["Had sufficient funds","Had no requirements for capital expenditure or other investments","Unwilling to increase debt","Could not meet debt repayments","Unable to meet eligibility requirements"],[[91],[56],[49],[6],[5]],[[92],[46],[33],[2],[3]],[[90],[47],[29],[2],[3]]]

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(a) Proportions are of businesses that did not seek additional funds.
(b) Businesses could provide more than one response.

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