NSW BUSINESS CONDITIONS

SEPTEMBER 2018

Quarterly snapshot of NSW economy informed by the businesses of NSW

 NSW THIS QUARTER

The NSW Business Chamber’s Business Conditions Survey points to tougher

trading conditions. Factors such as drought are weighing on regional
businesses with business confidence declining. Revenue has been trending
down while operating costs remain relatively high.
Despite some weakness evident in this survey, we expect a better result next
quarter. Broader economic measures such as the national accounts and
labour market indicators remain strong for NSW, even though other states are
closing the gap.
The NSW labour market remains the most obvious beneficiary of the state’s
economic successes with near full employment and more than 150,000 jobs
created over the past year — the best set of figures in the country.
Full survey results including detailed regional and industry-level data can be
found at the NSW Business Chamber website located at:
https://www.nswbusinesschamber.com.au/Issues/Business-
Surveys/Business-Conditions
For more information on the survey, please contact Laurence Redaelli
(laurence.redaelli@nswbc.com.au | 02 9458 7913)

NSW BUSINESS CHAMBER

The NSW Business Chamber is one of Australia’s largest business support

groups, with a direct membership of 20,000 businesses and providing
services to over 30,000 businesses each year. The Chamber works with
businesses spanning all industry sectors including small, medium and large
enterprises.
 NSW ECONOMIC SNAPSHOT

Unemployment rate 4.7% 2¾ per cent growth

Near full employment and the lowest In Gross State Product forecast
in the country (among states). for 2018-19.

$30.7bn in private
151,000 new jobs
capital expenditure
over the past year
Over the past year, 8.5% higher
Employment growth above trend than the same time last year.
and fastest in the country.

3.5 per cent growth in The bottom line

State Final Demand Our survey points to tougher trading
conditions in the September quarter,
Well above trend but fourth slowest in the primarily due to the impact of the
country (among states and territories). drought, with 84 per cent of businesses
indicating they were affected.

Source: ABS, NSW Government, NSW Business Chamber

INDUSTRY INDICATORS

NSW Retail Turnover NSW Visitor Arrivals NSW Building Approvals

Per cent Million $Bn Residential Non-residential
3.5
7 5
Growth (YoY)
Visitor arrivals: NSW
6
(Past 12 months)
3.25 4
5

4 3
3

3
2

2
2.75
1
1

0 2.5 0

Note: Seasonally Adjusted Note: Arrivals by state of main stay, Note: By value,
unadjusted for seasonal variation Seasonally Adjusted
Source: ABS
 SURVEY RESULTS
Drought takes some of the shine off NSW

Performance of the NSW Economy Staff Numbers and Capital Spending Individual Business Performance
50 50
15 39.2
40 40
10 30
30 6.9
15.4 5 20
20

10 0 10
-1.6 3.6
0 -5 0

-10 -3.5 -10 -10 -9.4

Current Expected Operating Costs
-20 -15 -20 Sales Revenue
Number of Employees Capital Spending Profits
-30 -20 -30

Note: Index scores are calculated as the percentage of respondents reporting an increase minus the percentage reporting a decrease. A positive number implies improving business
conditions (except for operating costs for which it implies cost pressures) whereas a negative number implies weaker conditions. There were 762 respondents to the survey.

OVERVIEW
• Business confidence took a hit for the quarter primarily due to the impact of the drought. Our survey
reaffirms the impact of the drought with New England and North West, and Central West experiencing the
sharpest deterioration in confidence this quarter. Newcastle and the Lower Hunter continue to impress as
the strongest performers across the state.
• Sydney has failed to buffer some of the weaker results observed across the state with retail trade and rental,
hiring and real estate service businesses weighing most heavily. Despite this, underlying conditions for
Sydney respondents appear to remain strong particularly in the key areas of profitability and staffing.
• Seasonal factors are also at play with accommodation and food services and retail particularly weak across
the board. Also notable is a divergence in the capital spending and staffing indices, which typically move
together as businesses expand or contract. A deterioration in reported levels of capital spending reinforces
the Drought Survey's finding that many regional businesses are delaying major capital spending decisions
until conditions stabilise, while reported staffing levels reflect broader strength in employment growth over
the past year.

QUOTES
• “For the first time since June 2013, more respondents reported a modest decline in the performance of the
NSW economy than their more optimistic peers.”
• “Our survey reaffirms findings from the Chamber’s recent Drought Survey which showed drought conditions
are having a material impact on the state’s regional economies.”
• “Sydney is experiencing weaker conditions, evident in areas such as retail and real estate.”
• “The weaker results evident this quarter can, at least to some extent, be explained due to seasonal and
temporary factors.”
• “Positive staffing results and respondent’s positive outlook for the economy provides a basis to anticipate a
better result next quarter.”
Source: NSWBC Business Conditions Survey
Full results: https://www.nswbusinesschamber.com.au/Issues/Business-Surveys 4
 BUSINESS NEEDS IN FOCUS

In August the Chamber asked respondents about the impact of the drought.
Below is an overview of the survey results which can be found at:
https://www.nswbusinesschamber.com.au/Issues/Business-Surveys/Other-Business-Surveys

84 per cent indicated they were Approximately 1 in 3 affected

impacted by the drought, 43 per businesses indicated the viability of
cent of which said the current their business was at risk due to
drought was far more severe current drought conditions.
than previous droughts.
4 in 5 affected businesses More than 2 in 3 affected businesses
indicated cash flow had been indicated they would scale back
affected due to drought investment and reduce capital
conditions. compared to previous plans.
On average, affected businesses 67% of businesses indicated that
indicated they may have to reduce their local economy had been
staffing levels by weakened due to drought.
1.5 employees.
Note: ‘Affected businesses’ refers to respondents indicating they had been impacted by the current drought.

DROUGHT IMPACT^ Richmond

- Tweed

Coffs
New England Harbour-
and North West
Grafton
Far West and Orana
Mid North
Coast
Hunter

Newcastle
Central West Central Coast
Sydney
Murray
Riverina Illawarra

^Weighted revenue losses Southern Highlands

reported by respondents and Shoalhaven
indicating they have been Capital
affected by current drought
conditions.
Region
Insufficient
Business
Down 40% Down 20% Down 0% Responses
 REGIONAL PERFORMANCE

Business Confidence# Unemployment Youth

Region September Quarter Past Four Quarters
(Index) (Index) rate* Unemployment*
Sydney 0.5 (n=208) 9 (n=852) 4.3% 9.1%
Central Coast 2.1 (n=47) 14.5 (n=193) 5.9% 15.5%
Capital Region -2.8 (n=36) 6.4 (n=171) 4.9% 7.6%
Central West -13.2 (n=53) 10.4 (n=202) 5.2% 7.3%
Coffs Harbour - Grafton -11.6 (n=43) -0.6 (n=161) 8.6% 22.9%
Far West and Orana 0 (n=26) -6.6 (n=122) 3.1% 4.6%
Hunter Valley ~ 33.7 (n=86) 5.6% 13.4%
Illawarra -9.1 (n=22) 3.6 (n=167) 4.4% 11.3%
Mid North Coast 0 (n=43) 12.9 (n=186) 4.6% 11.9%
Murray 7.5 (n=53) 12.4 (n=194) 8.8% 19.2%
New England and North West -35.1 (n=57) -5.6 (n=250) 6.6% 16.9%
Newcastle and Lake Macquarie 33.3 (n=12) 23.5 (n=234) 5.7% 10.3%
Richmond - Tweed -3.4 (n=58) -3.2 (n=253) 4.8% 8.7%
Riverina 10.5 (n=38) 11.9 (n=218) 6.0% 15.0%
Southern Highlands and Shoalhaven -11.8 (n=17) 6.3 (n=80) 7.6% 12.4%
*August 2018, annual averages used for regional unemployment rates. ~Insufficient responses were received.
#Index is calculated as the percentage of respondents reporting a stronger economy minus the percentage reporting a weaker economy.
A positive number implies improving conditions while a negative number implies conditions are weaker.
Full regional results available at: https://www.nswbusinesschamber.com.au/Issues/Business-Surveys/Business-Conditions

CONFIDENCE MAP^ Richmond

- Tweed

Coffs
New England Harbour-
and North West
Grafton
Far West and Orana
Mid North
Coast
Hunter

Newcastle
Central West Central Coast
Sydney
Murray
Riverina Illawarra
^Confidence Map Southern Highlands
Capital
Weighting is based on
Region and Shoalhaven
business confidence levels
over the past four quarters

Relatively Below Above Relatively

Weak Average Average Strong

Source: ABS, NSWBC Business Conditions Survey