SMEs suffering from plummeting business confidence: ACCI report

The small business sector is continuing to lose confidence in the economy, according to the Australian Chamber of Commerce and Industry, as it calls for changes to unfair dismissal laws.

According to the February 2012 ACCI Small Business Survey, based on the responses of 1,744 small businesses, conditions in the small business sector appear to be stabilising.

“Nevertheless, trading conditions remain deeply suppressed in the face of uncertainty arising from the European sovereign debt crisis and torpid domestic demand,” ACCI said.

The survey shows the small business sector is continuing to lose confidence in the economy, with all business sizes reporting pessimistic expectations for the economy in the coming year.

Profit growth remains in contraction territory, with the index on profits at 38.7. An index level below 50 means the variable is falling, while a reading above 50 indicates it is increasing.

However, the sector continues to record significant cost pressures in relation to labour, with indices on wage growth and non-wage labour costs remaining well above a reading of 50.

Meanwhile, insufficient demand ranks as a top five constraint on investment for firms of all sizes.

Greg Evans, ACCI director of economics and industry policy, says small business operators continue to report extremely difficult trading conditions, and remain pessimistic about the future.

“The current economic backdrop is sapping confidence including European instability, uncertainty about the direction of interest rates, the upcoming carbon tax impost and weak demand conditions across many of the sectors where small business predominates,” Evans says.

“The survey nominated business taxes, government charges, insufficient demand and the impact of regulations as the largest impediments to investment.”

“While a quick turnaround in demand conditions is not likely, the focus needs to be on reducing costs faced by business.”

“This means reducing taxes and winding back the regulatory burden sponsored by government at all levels.”

The survey comes on the back of an ACCI submission on the Fair Work Act. Among its many proposals, ACCI is pushing for changes to the unfair dismissal laws.

It said the laws have encouraged the re-emergence of “go-away money in cases where dismissal is justified but where the cost and time associated with defending a claim is uneconomic”.

The group advocates tighter criteria before claims can be made, and more rigorous processes once they are introduced.

“The case for change to the Fair Work system is profound and now widely reported through the experience of businesses large and small,” ACCI chief executive Peter Anderson said.

The Victorian Government has backed ACCI’s concerns about payouts to sacked employees for unworthy claims.

In its own submission, it said employers are being caught by the laws even if there is a valid reason for dismissal.

“A decision to terminate employment might be considered unfair due to any failure to strictly comply with procedural requirements,” it said.

It also noted employer concerns that many unfair dismissal claims are speculative.

“[Employers have] to pay go-away money to settle unmeritorious claims to avoid involvement in more lengthy and costly tribunal proceedings,” it said.