Businesses have proven to be resilient to economic turbulence both within the country and internationally, but the outlook for 2023 could be more optimistic.
As we approach the end of 2022, a 300 basis point increase in the cash rate from its record lows is beginning to have a negative impact on business confidence and overall conditions.
According to a recent survey conducted by NAB, business confidence has declined for the first time in November, despite a continued but weakening trend in overall conditions.
Rising interest rates and a slowing global economy are starting to cause business owners concerns. Not only is this causing a decrease in consumer spending and demand for goods and services, but the sustained increase in rates is also making it more difficult for businesses to borrow money or refinance existing loans.
According to University of Sydney finance lecturer Alessio Galluzzi, small and medium-sized businesses are particularly vulnerable to fluctuations in the business cycle. He stated that “the overall uncertainty about future prospects is weighing down investors’ expectations and willingness to invest.”
In addition to concerns about the general state of the economy, small businesses also anticipate that 2023 will be a more difficult year than 2022 due to increasing cost of living pressures and rising inflation.
In fact, a recent survey found that 51 per cent of small businesses cited rising costs of products and services as their top challenge when it comes to online sales growth, while only 22 per cent reported that finding customers was their main business challenge. Despite these challenges, 51 per cent of respondents indicated that they feel satisfied with the support available to them, which may include government assistance for small and medium-sized businesses.
Australian Chamber of Commerce and Industry boss Andrew McKellar said worsening economic conditions were starting to bite, and the chamber’s gauge of industrial business conditions dropped sharply into negative territory over the December quarter.
Mr McKellar said the final quarter results came as a surprise as they showed the slowdown in industrial business activity happening much quicker than expected. While recognising the downward pressures on key inflationary drivers such as energy, he said a worst-case, stagflation-type scenario was still possible.
“We don’t want to have a situation where we’re continuing to struggle with high input costs, declining profitability, but at the same time, you know, seeing that demand and output are pulling back,” he said.
According to Richard Thame, CEO of CouriersPlease, the tight labor market in Australia is expected to continue into 2023 and will put a strain on the logistics industry. However, he anticipates that reduced volumes in the second half of 2023 may offset labour shortages for some companies as the economy experiences a downturn.
Thame also predicts an increase in the adoption of automation in the industry, as well as an increase in skilled migrants, which will help to alleviate some of the pressure.
The increasing threat of cyber attacks
As businesses look back on their performance in 2022 and gather insights from their respective industries, it is difficult to ignore the significant increase in cyberattacks that affected many sectors this year.
According to the Annual Cyber Threat Report by the Australian Cyber Security Centre (ACSC), the three industries in Australia with the most reported incidents between 2021 and 2022 were the federal government, the state government, and healthcare.
However, it is important to note that other sectors are also at risk, as the report showed that small to medium-sized organisations experienced a nearly 300 per cent increase in reported “isolated” and “extensive” compromise incidents.
The report also revealed that medium-sized businesses were particularly vulnerable, experiencing the largest losses during the last financial year.
Cyber risks are more prevalent now than ever before, and businesses must take steps to protect themselves.