Australia’s mid-market business leaders are mostly optimistic about growth and profitability for the rest of 2022 and the next three years, according to a new survey from KPMG.
Fifty-four per cent of the mid-tier business leaders surveyed had a positive outlook, including 26 per cent who forecasted growth of 10 per cent or more, while 34 per cent remained neutral and 11 per cent were pessimistic.
The survey, conducted by KPMG in the lead up to the federal budget later this month, also found that 44 per cent of leaders expect wages growth will climb between 4 and 8 per cent while a further 44 per cent expect wages will grow between 2 and 4 per cent.
“It is encouraging that Australia’s mid-market sector, the heartbeat of the national economy, is feeling reasonably confident, given the past two years of COVID disruption, and the authorities will probably be encouraged to see that businesses expect there to be steady wage growth over the next three years,” said KPMG enterprise tax leader Clive Bird.
“While this may introduce cost pressures for business, it’s a positive sign for the Australian economy overall.”
Recruiting and retaining skilled staff is set to be one of the greatest challenges over the next 18 months according to 69 per cent of leaders, with cost and margin pressures (56 per cent) and supply chain disruption (41 per cent) also presenting major challenges.
The leaders overwhelmingly predicted that interest rates will rise in 2022, including 71 per cent who believe that their company’s debt levels were currently low enough to be manageable.
However, 23 per cent said that a rate rise would have an impact on their business and 3 per cent said a material increase would have a significant impact on cash flow and profitability.
Most leaders believe that the government should now start to repay debt, primarily through economic growth and increased productivity (67 per cent) as well as government spending cuts (14 per cent) and tax increases over the longer term (12 per cent).
Half of respondents said that an increase to GST would be the most effective tax increase but 28 per cent stated that tax increases should be avoided if at all possible.
“While most respondents believed some form of tax reform was necessary, there is very little support for other tax increases,” said Mr Bird.
“Measures such as reducing superannuation, capital gains tax or negative gearing concessions received support of just 16 percent.”
Ninety-three per cent of leaders believe that this year’s budget should include tax measures to help boost growth in the mid-market sector, including 61 per cent who called for major tax reform to help with the nation’s recovery.
Furthermore, 59 per cent said that the budget should re-establish critical manufacturing in Australia and 50 per cent highlighted the need for greater investment in training programs to address the skills and labour shortage.
“It is pleasing to see that there is support from business leaders for retaining the instant asset write-off over the long-term, increasing access to R&D tax incentives and innovation and start up tax incentives, for example,” said Mr Bird.
“These are the sort of measures that support growth and business activity in the mid-tier market. It is clear that while businesses accept that government debt repayment has to come, tax rises are still not their preferred way of doing this. Measures to increase growth and productivity are favoured.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
