The ABS revived its Business Conditions and Sentiments survey today for the first time since June 2022, and the results are confronting. One in three Australian businesses expect it to be difficult to meet their financial commitments over the next four weeks.
📊 72% of businesses reported fuel prices or availability are having a negative impact on their business
📊 82% of businesses cited fuel prices as a reason for increased operating expenses
📊 48% of businesses are absorbing higher costs rather than passing them on
📊 16% of businesses are experiencing supply chain disruptions, led by agriculture at 42%
📊 33% of businesses expect it to be very difficult or difficult to meet financial commitments in the next four weeks
📊 17% of businesses have delayed or cancelled capital investment plans due to fuel prices
📊 58% cited freight or delivery costs as a driver of increased expenses
The ABS brought this survey back specifically to measure the impact of the Hormuz crisis on Australian businesses. The survey was conducted between 4 and 15 May. The results confirm what many of us have been hearing anecdotally for weeks. Businesses are hurting.
The 33% financial commitments figure is the one that should be getting everyone's attention. A third of Australian businesses saying they'll struggle to pay their bills in the next month is an extraordinary number. Transport, postal and warehousing is the worst hit at 56%, followed by accommodation and food services at 49% and agriculture at 44%. These are industries with thin margins at the best of times. This isn't belt-tightening. For many of these businesses, this is survival mode.
The cost absorption number is almost as alarming. Nearly half of all businesses are eating higher costs rather than passing them on to customers. That tells you two things. First, businesses know their customers can't handle more price increases right now. Consumer confidence is in the gutter and household spending is contracting. Second, every month a business absorbs costs it can't recover is a month that eats into cash reserves and brings it closer to the edge.
What makes this cycle so dangerous, and what I keep coming back to in my conversations with business owners, is that the usual escape valve isn't there. During COVID, businesses could pass on cost increases because there was a demand tailwind from stimulus. Consumers were cashed up and willing to pay. That's not the case today. Inflation is running at 4.6%, real wages have been going backwards, and consumer sentiment is near record lows. Businesses are getting squeezed from both sides. Costs going up, demand going down.
The 17% of businesses delaying or cancelling investment is the slow burn that will hurt for years. When businesses stop investing in equipment, technology and capacity, they're not just cutting costs today. They're locking in lower productivity for years to come. That's how temporary crises create permanent economic damage.
If you're a business owner reading this and recognising your own situation, here's the honest advice. Do the numbers now. Know exactly how many weeks of cash you have at current burn rates. If the answer is less than twelve, you need to be having difficult conversations with your accountant, your banker, or someone like me, today. Not next month.
The difference between a business that survives this and one that doesn't almost always comes down to how early the owner faced reality.