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Media Release

South Australian business and consumer confidence feels effect of Omicron but remains solid

Friday, 25 February 2022

The latest business and consumer confidence results for South Australia show that confidence has moderated in February off the back of the Omicron wave in South Australia but remains solid.

The BankSA State Monitor survey (conducted February 2-7) shows business confidence has decreased by 3.2 points to 118.6 points since last October’s survey, however this result is still higher than the average across the nine years to 2021.

Consumer confidence decreased 12.2 points to 108.5 points, the lowest result in the past two years, but above the February 2020 pre-pandemic level.

BankSA State General Manager Business, David Firth, said business and consumer confidence has been impacted by the increase in COVID cases in the state, particularly with the arrival of the Omicron variant, following the opening of South Australia’s domestic borders late last year.

“While confidence has dipped, it still remains firmly in positive territory and at a good level, which bodes well for a swift recovery as restrictions continue to subside and activity increases,” said Mr Firth.

“The most significant factor driving this survey’s results was the perception of small business activity in the state, down 16 per cent for businesses and 32 per cent for consumers. This reflects the visibly reduced activity as people have worked from home and have chosen to stay in more than usual. This has been particularly noticeable in the CBD and is impacting both consumer and business confidence levels.

“Our research also shows that labour shortages have continued to gain pace as an issue, with a nine per cent increase in employees indicating their industry is experiencing labour shortages in February (59 per cent) compared to October last year (50 per cent),” said Mr Firth.

“However, the reasons for labour shortages have shifted since the last survey. Employers now cite competition from other industries paying higher wages and offering better working conditions, along with impact of COVID close contacts, as the main challenges compared to the impact of border closures which dominated in October.”     

The State Monitor showed that there was also decreased confidence that the climate for doing business will improve in the next 12 months, and a reduction in businesses planning to create additional employment.

Mr Firth said that larger sized SMEs are still the most confident, despite a drop this survey, while small businesses with less than five employees recorded an increase to be back in positive territory again.

“Continued pressures and the impact of restrictions felt by the recreational, community services and retail industries make these the least confident industry sectors, having been impacted by the changing COVID landscape and workforce challenges,” he said.

“Conversely, transport, finance, manufacturing and construction are the state’s most confident industries, consistent with the previous survey.” 

Businesses were less worried about, or impacted by, a downturn in turnover over the past three months but are restrained about their projections for the coming 12 months.

“It makes sense that businesses remain cautious as we navigate through the Omicron recovery phase, along with the upcoming state and federal elections.”

Both businesses and consumers cited global factors such as petrol prices, China’s influence on Australia’s economy and the world economy as the main external factors that are most negatively influencing them.

While businesses are positively influenced by their own household position and income security, similarly, consumers were buoyed by employment and income security, and their perception of South Australia’s long-term outlook.

“While confidence has been dented since last October, optimism amongst South Australians is still strong.

“As restrictions ease, activity will increase and events such as the Fringe will encourage people to have the confidence get out again and support the economy.”

Regional confidence

Business confidence in South Australia’s rural regions mirrored the statewide results with a 6.4-point decrease in February to 110.6 points, while regional consumer confidence decreased by 10.9 points to 111.0 points.

“The southern region, which includes the South Coast, South East, Hills and Murray Plains bucked the trend with an increase in business confidence, largely driven by an increase in state pride and an improvement in their business situation,” Mr Firth said.

“All regions still remain confident with results sitting above the benchmark rating of 100.

“The agricultural sector showed a decrease in confidence, possibly reflecting recent weather events such as the widespread flooding in the north and west of the state that affected livestock and crops and cut transport links.

“The drop in regional consumer confidence was mostly felt in the Mid North and Riverland region, which also includes the Barossa and Yorke Peninsula.”