Skill shortages and supply chain delays have also hampered the recovery of many businesses and Melbourne Chamber member Bendigo Bank has shared some insights on current market conditions and how they are impacting business.

In the following article Bendigo Bank State Manager Business Banking VIC Metro, Michael Waters, discusses domestic trends, business sentiment, the commercial property market, opportunities for business and how it is helping customers navigate this challenging period.

The economic outlook for the coming financial year is volatile

The outlook for the Australian economy is one of rising costs, inflation and interest rates, but still strong demand for labour and relatively high household spending. The unemployment rate (currently 3.5 per cent) is likely to fall to around 3 per cent by year-end but then weaken next year to around 4 per cent as Reserve Bank rate hikes take effect, slowing GDP growth to below 2 per cent next year.

The sharp rise in costs of goods and services amid supply chain constraints and elevated oil and energy prices will take time to normalise, so inflation is unlikely to peak until early next year. Offsetting these challenges will be a rebound in international tourism and high household savings providing a buffer against rising costs of living.

Business sentiment has been resilient despite challenges

Businesses are faced with the challenge of how readily they can pass on higher input costs to consumers, and the challenge of lack of availability of suitable staff. The September Jobs and Skills Summit will be important to address labour shortages, but more urgently we need visa turnaround times to be accelerated and the resumption of internal student intake will also help.

Business confidence has been remarkably resilient through the pandemic and even in the last few months as retail sales have remained firm (despite falling consumer confidence) and probably based on optimism around the ability to pass on costs to consumers – although there is significant variation by sector and by location.

The commercial property market remains mixed

Commercial property has also been resilient for industrial property and via offshore investment, but has been weaker for CBD hotels and offices, and mixed for retail. In a low interest rate environment the return on commercial property has remained appealing, but RBA rate hikes will challenge this sector – although the pipeline for new construction and public infrastructure remains strong.

There are opportunities for local business to take advantage of current market conditions

Many small enterprises have been impacted by a concentration of suppliers, particularly those importing most of their inventory. With a focus on diversification of supply now more prevalent and a switch to domestic alternatives, this has created opportunity for local business to fill some of that void.

The current market conditions and restrictions on labour supply have also created an opportunity for businesses to assess what it is they actually want to do and should be doing. This has seen some businesses narrow their product or service range and made them focus on core operations and typically only those that are profitable.

Bendigo Bank is actively assisting its business clients navigate this period

Bendigo Bank – Business Customer is committed to being the best banking partner for SMEs in Australia. Our business owner customers have told us they want competitive rates, a wide product range and banking to be made easy and that’s what we are committed to.

Our Banker portfolios are smaller than the majors thus enabling us to build a deep understanding of our customers’ business, which is key to true relationship banking and in the past 12 months we have completely transformed our business model as a genuine sign of our investment and commitment in this segment.

We are truly able to say to our customers that “Your Business Matters” and we have the resources and experience to assist businesses, in this dynamic environment, to plan strategically, build robust day to day operating systems, manage their people, invest and build a brand.