Nearly 1 in 3 businesses stagnant due to fuel costs

Business advocates around the country have highlighted the impacts businesses are facing from the Middle East conflict, with surveys revealing financial and solvency issues amid rapidly climbing overheads.

The Middle East conflict negotiations between the US, Israel, and Iran may have won a shaky two-week ceasefire, but have led economists to predict at least six months of further inflation, signalled by likely three rate rises throughout the year, as reported by Accounting Times.

In a survey conducted between 24 March and 2 April, Impact of the fuel supply crisis on businesses, the Australian Chamber of Commerce and Industry found that out of 2,300 respondents who owned businesses, 80 per cent reported higher operational costs due to the conflict’s effects on fuel prices, and 70 per cent reported higher freight and transport costs.

The survey was a collaboration between the chamber, Business NSW, the Victorian Chamber of Commerce and Industry, Business Chamber Queensland, the Chamber of Commerce and Industry Western Australia, and the South Australian Business Chamber.

Further, 61 per cent of respondents reported they absorbed higher fuel costs instead of passing them on to their customers, 44 per cent experienced cash flow pressures, and 43 per cent had reduced customer spending, with 55 per cent of businesses having reported that they reduced essential spending and 31 per cent reporting putting investment or expansion plans on hold.

In addition, nearly two in five (38 per cent) reported needing government support to manage increasing fuel, freight, and transport costs.

Not-for-profit business advocacy group Business NSW conducted an independent survey of 630 employers and found that 84 per cent said that the Middle East conflict is impacting their operations, and 37 per cent stated significant or severe impacts.

The not-for-profit found that the fuel crisis is also leading businesses to review staffing levels and hours (47 per cent) and reduce hours or income (29 per cent), stressing that job-saving tax relief is needed for regional businesses.

In addition, 19 per cent of respondents reported that staff asked for extra WFH days to save on fuel, and 35 per cent reported that staff experienced growing uncertainty around employment and job security.

After the fuel excise was halved on 31 March, employers welcomed the announcement; however, the Health Services Union called for greater support for employees who do not have the option to work from home, as reported by HR Leader.

On top of fuel and freight cost pressures, payroll tax remains above 5 per cent for half of the nation’s states and territories. Tasmania currently has the lowest payroll tax rate at 4 per cent, followed by Queensland (4.75 per cent), Victoria (4.85 per cent), and South Australia (4.95 per cent).

NSW’s payroll tax rate is the fourth-highest in the nation, currently sitting at 5.45 per cent, frozen at a threshold of $1.2 million, following the highest payroll tax in the nation, the ACT (6.85 per cent) and Western Australia and the Northern Territory (both at 5.5 per cent).

Business NSW chief executive Daniel Hunter said: “As any small and medium business owners know, payroll tax compounds the cost because it is effectively a tax on employment.”

“That’s why Business NSW is calling for a significant reduction in the rural and regional payroll tax rate to ensure labour-intensive businesses are not taxed into insolvency.”

That means that an NSW business with a $4 million annual taxable wages bill would save approximately $110,000 if it were based in regional Australia.

“We are hearing clear, repeated requests for immediate relief and stronger oversight, including certainty of diesel supply, action on price gouging, temporary fuel tax relief, and targeted regional payroll tax relief to protect jobs before businesses start closing.”

Currently, more businesses in NSW have failed compared to Victoria and Queensland combined, with more than 3,600 NSW businesses entering insolvency for the first time between July and early March, a 21 per cent increase on 2024.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said: “The global price shocks from the conflict in the Middle East have had direct and serious impacts on businesses in Australia.”

“Businesses will remain on edge until there is a clear and lasting end to the conflict. Even if hostilities pause, disruptions to oil supply will have lasting consequences in many industries.”

“If the conflict resumes and conditions deteriorate significantly, the federal government will need to consider cash flow support to ensure businesses can continue operating.”