Almost three-quarters of Australian businesses reported that higher fuel prices had a negative impact on their business in May and June this year, according to a survey by the Australian Bureau of Statistics (ABS). The survey, reintroduced in response to the fuel crisis, also revealed that 9% of businesses reduced their workforce in May directly due to higher fuel prices, rising to 8% in June.
Business Responses to Rising Fuel Costs
In May, 47% of businesses absorbed the rising costs, while 44% did so in June, likely because they considered the price rises temporary or consumer demand insufficient for passing on increases. However, 12% of businesses passed on higher prices in May, increasing to 15% in June. This trend poses challenges for inflation but could have been more severe.
The accommodation and food services sector was particularly affected, with 28% of businesses reporting workforce reductions in June (33% in May). Additionally, 15% of businesses delayed or cancelled investment plans in June. The recent fall in global oil prices is a welcome development, but the impact has been significant.
Cost-of-Living Pressures and Government Support
Cost-of-living pressures remain the top concern for Australian households, with fuel prices exacerbating the situation. Governments are under pressure to provide more support amid what is often termed a "polycrisis"—geopolitical uncertainty, rising inflation, falling productivity, climate change, biodiversity loss, and inequality. However, economist Nicki Hutley argues that expectations of government intervention must be realistic.
In response to the New South Wales budget on 23 June, a small business owner welcomed cost-of-living relief such as toll caps and registration changes but noted it wouldn't make a huge difference. "It won't make you a millionaire," he said. Hutley questions whether it is reasonable to expect governments to solve every problem, especially when some advocate for reduced spending while opposing cuts to tax perks for large superannuation balances.
Economic Security and Productivity
The concept of economic security—producing goods domestically to avoid supply chain vulnerabilities—has gained urgency. However, Hutley cautions that governments cannot solve all problems. Research from the e61 Institute shows a large productivity gap between Australian and US firms operating in Australia, particularly in manufacturing and information sectors. The gap is attributed to US firms investing more in intellectual property and employing it more successfully. Hutley suggests that much potential improvement in business performance lies within businesses' own hands, rather than solely blaming red tape or tax rates.
Governments have a clear role in shaping lives for the better during crises and helping those most in need, but Hutley argues that the entrepreneurial spirit in Australia needs to be revitalized for national advancement.
