The drought continues to have a major negative impact on Victorian businesses, especially in regional Victoria, according to a recent VECCI Survey.
VECCI CEO Wayne Kayler-Thomson said that responses to special questions sent to VECCI members as part of the December quarter 2007 VECCI Business Trends and Prospects Survey indicate that, although the impact of drought seems slightly less severe than at the same time in the previous year, impacts are still being felt across a range of business indicators, including sales, exports, investment and employment.
"When asked whether the ongoing drought has had an impact on their business, 15 per cent of respondents indicated that it has had a major adverse impact, while a further 34 per cent indicated a minor adverse impact. Just under half of the survey respondents indicated that the drought has had no impact on their business. In contrast, 3 per cent of respondents indicated the ongoing drought has had a positive impact on their business", says Mr Kayler-Thomson.
"When asked a similar question in December 2006, the impact appeared to be more widespread with 20 per cent indicating the drought was having a major impact and 39 per cent indicating a minor impact. Forty one percent of respondents indicated the drought was having no impact.
As expected, regional businesses have been impacted more than their metropolitan counterparts. Sixty per cent of regional businesses indicated some degree of adverse impact, compared to 40 per cent of metropolitan businesses. In December 2006, 79 per cent of regional businesses indicated an adverse impact, compared to 46 per cent of metropolitan businesses.
While respondents from all sectors indicated some impact from the drought, those in the Agriculture, Forestry and Fishing sector indicated the greatest level of impact, with 70 per cent reporting a major adverse impact, and the remaining 30 per cent reporting a minor adverse impact. The Recreation, Personal and Other Services sector (which include Accommodation, Cafes and Restaurants businesses) also indicated a high level of impact with 39 per cent reporting a major adverse impact, and 27 per cent a minor impact.
When asked in what way was the impact apparent, the majority of businesses (79 per cent) indicated the drought had affected businesses revenue and sales. This is consistent with results from December 2006. Other areas affected include business investment plans (15 per cent) and levels of employment (16 per cent). Overall results were largely consistent with those recorded in the previous year.
More specifically, 54 per cent of businesses impacted by the drought indicated reduced demand from drought-affected customers. This is a slight decline on the number who indicated this 12 months ago (58 per cent). Businesses also indicated higher input costs (31 per cent), delayed payment from customers (28 per cent), direct impact on production volumes (18 per cent), a shortage of materials and supplies (16 per cent) and an increase in bad debts (12 per cent).
"The continuing serious economic effects of the drought should prompt State and Federal Governments to drive measures that encourage business investment and productivity growth, such as lower taxes and charges, cuts in red tape, a realistic industrial relations framework, investment in tourism promotion and improved infrastructure outcomes in the area of water, freight and tourism.
"The Port Phillip Bay Channel Deepening Project is a case in point – its successful completion will cut freight costs through our main trade artery for our regional exports.
"Effective program responses are also essential – VECCI has partnered with the State Government to deliver the Drought Business Transition Program, which is designed to help non-farm businesses make accurate decisions about survival or transition", says Mr Kayler-Thomson.
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