Seasons come and go with familiar predictability, but the economic downturn we are potentially heading into is something that Victorian businesses won’t have experienced for decades. Business sentiment is uneasy and speculation over the State and Federal Budgets’ positioning is causing some deep reflection. As governments signal that they are punching additional holes to tighten their belts in the leadup, we are all feeling the squeeze. 

It’s true the debt position puts Victoria in a difficult situation. And it’s also true that Victoria’s state debt is concerning, with interest charges growing as rates have risen. 
Most businesses I speak to are preparing their outlooks for next financial year from July 1, and they are being forced to do so against a backdrop of a tempered optimism for what the year ahead might have in store. 

Businesses are still aiming, with varying levels of sanguinity, to achieve a level of profitability that is acceptable to shareholders or owners. But in order to achieve this, it’s inevitable that cuts will be made and excesses trimmed. 

It will invariably lead to a higher unemployment rate, and it should be no surprise that at a Federal Government level, this is something already being contemplated. The interest rate rises that are designed to reduce inflation are driving towards this outcome. 

At a managed level, we will be able to navigate our way through. But, if the economy deteriorates more than anticipated, business will seek to reduce their costs further in line with a reduction in sales. Then we will see even more people entering the unemployment queue. 

It’s why this budget at a state level is so important. Yes, our debt level needs to be managed downward, and the government has committed to a return to surplus over time, but hitting businesses with additional taxes or levies to generate revenue is not the answer. 

Responsible budgeting, consolidating, reducing costs and growing revenue is our path to emerge from debt. To achieve this, the State Government must provide business with the best environment and conditions to continue driving Victoria’s economy. 

Business-friendly conditions will drive growth, create jobs and ensure a strong and sustained recovery that benefits the entire community. Business growth will also produce more government revenue as Victoria becomes more attractive to own and operate a business. 

The reservations felt by business leaders are a consequence of expected belt tightening by consumers. This is already impacting across hospitality and retail operators who are noticing a downward trend on spending as consumers start to show restraint. 

But we have reason to remain optimistic. Our business base is in good shape, and many sectors are continuing to expand and add staff. The Government’s Big Build program, and the recent announcement from Crown Resorts are examples of continued employment certainty and growth. 

Add that to the forecast population growth to migrate to Melbourne and there should be flow on positive impacts for business. 

Business is looking for the signal from Government that it is working with them, and that it will help business drive economic growth. This cannot be done through increasing taxes or further regulatory burden on business. Innovation and ensuring certainty in the transitioning energy market will unlock further economic growth and should be high on the Government’s agenda. 

We are looking to Government to facilitate growth and provide business with the best conditions so they can do what they do best: creating value and jobs for the economy, while continuing to be the heart of the community. We can expect to see business continuing to contribute some of their profits towards the community, but that will not be viable if taxes increase. 

Our debt must be managed to ensure the debt rating agencies don’t decrease our credit rating. That can be done by managing expenditure across an extended period in an orderly way. Add to that a healthy dollop of innovation, energy certainty, and reduction in red tape and we will see our Victorian economy respond in kind. 

Just as we got through COVID, we will get through this. And as the saying goes, things are as never as bad as they feel or as good as they seem. Business is ready to play its part. 

A version of this originally appeared in the Herald Sun on Saturday 29 April 2023