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Sunshine Coast Business Confidence Survey - Economic Commentary for April 2011 Survey, By Michael Campbell from AECGroup.

It has been a while.  As you would have noticed, the Sunshine Coast Business Confidence Survey has gone half yearly, so we no longer have January data, which has proven historically to be a good quarter, with many businesses benefiting from the holiday season and high visitation to the Coast.  

So, nobody panic (just yet), but the most recent results demonstrate a worsening business environment on the Sunshine Coast, with 52% of businesses showing weaker results over the last six months.  This is a new record high for this survey and builds on the previous record of 48%.  As demonstrated below, the move came at the expense of businesses reporting the same or higher trading results (22% and 26%, respectively).  

Source: AECgroup; Sunshine Coast Business Confidence Survey (2011)

The September 2010 survey showed a typically upbeat business outlook with nearly half of all businesses expecting stronger results in the future as we headed into the tourist season. So what has happened?  Looking over the numbers, it looks like a soap opera of economic figures, drama and disaster around every corner!  In fact, since the last survey in September 2010, there have been fewer visitors to the Coast, natural disasters, record highs for the Aussie dollar and rising inflation, all of which are likely to impact businesses on the Sunshine Coast.

Quarterly figures show that fewer visitors came to the Sunshine Coast in December 2010 compared to the previous year.  Additionally, the flooding in South East Queensland interrupted numerous businesses and has considerable flow on impacts across the economy.  The Australian dollar continues to break records and is currently trading around US$1.07-US$1.08 level.  March quarterly inflation figures are up 1.3% and 3.5% from the previous year, translating to higher costs of living for everyone.  

The most recent survey indicates that indeed many of these factors are threatening businesses on the Sunshine Coast. Over half of businesses see the impacts from the floods and cyclone as a threat and 76% see fuel price trends (indicative of increasing inflation) as a theat.  Interestingly, only a third of businesses are worried about climate change impacts and 40% about the high Aussie dollar.  

Source: Sunshine Coast Business Confidence Survey (2011)

Detailed responses in the survey indicated that the natural disasters in Queensland have generated numerous flow on impacts to the Sunshine Coast, with many businesses citing operations in Brisbane or North Queensland that were (and some remain) completely shut down.  The high dollar and increasing taxes were also mentioned frequently in the detailed responses.  Indeed, two-thirds of businesses responded that they are worried about future taxes (flood levy/tax and the carbon tax).  

These responses highlight the challenging and dynamic environment that all businesses operate in and the myriad of issues that can appear.  While all of these factors are out of the control of businesses, they must prepare for and manage these issues.  From a regional economic perspective, the reliance of the Sunshine Coast on tourism (mentioned throughout the survey responses) makes many of these issues worse.  A diverse economy can be similar to a diverse investment portfolio, where risk is shared around as much as possible to assist with any unforeseen changes or factors that are beyond our control.

On a much brighter note, it appears that Sunshine Coast businesses have found ways to deal with recent hardships.  The future outlook of businesses on the Sunshine Coast is very positive.   While we have become accustomed to businesses on the Sunshine Coast being more optimistic than businesses across the state, this optimism in light of the recent trading conditions is very impressive.

Source: AECgroup; Sunshine Coast Business Confidence Survey (2011); Commonwealth Bank CCIQ Pulse Survey (2011)

As indicated above, 73% of businesses on the Sunshine Coast believe that the next six months will be stronger or stay the same, compared to 59% of businesses across the State, as per the most recent Commonwealth Bank / CCIQ Pulse Survey.

As sunny skies return to the Sunshine Coast (hopefully for good now), we look forward to seeing if business conditions can also improve.

Michael Campbell is a Senior Consultant with the AECgroup, an Australian economics and property consulting company based in Brisbane.

To download the full report go to our Sunshine Coast Business Confidence Survey page.