Business optimism in Australia remains high, despite rising inflation

Despite the highest inflation rates in decades, it appears businesses remain optimistic in Australia. A recent report revealed that over 80% of businesses have a positive outlook for the Australian economy over the next 12 months.

According to the latest Global Business Report from Grant Thornton International, local businesses are turning their attention inward to adapt to the new business environment.

About a quarter of companies focus on product differentiation to protect against rapidly rising inflation, while 31% focus on internal efficiency.

“Findings from Grant Thornton’s IBR research show that Australian companies that innovate, improve internal efficiencies and seek opportunities to diversify their offering will weather this economic downturn,” said Michael Pittendrigh, National Managing Partner – Advisory and Tax and advice to private companies. to Grant Thorton.

Infrastructure and energy costs rank first among the top contributors to business stress, according to the data. Australian businesses estimate that energy, utility and transport costs have risen by 19% over the past year.

Other prominent issues include finding and retaining staff. Nearly half (46%) of businesses said labor costs were a top concern.

Globally, raw material costs rose more than 20%, while bank and interest charges jumped 16%.

“As Australia’s economy takes another hit from rising inflation and subsequent interest rate hikes, businesses and consumers are both feeling uncertain, leading to some belt tightening. and looking for ways to cut expenses,” Pittendrigh noted.

How can companies protect themselves in times of inflation?

In response to rising inflation, rising operational costs, and associated issues, businesses can implement a few measures:

  • Evaluate measures to limit external costs. Can you buy materials in bulk? Can you renegotiate terms with suppliers?
  • Consider outsourcing activities to address labor shortages
  • Review pricing strategies to keep pace with cost increases. Is there a way to increase prices without losing competitiveness? In addition to adapting prices to rising costs, are you able to increase prices based on customers’ willingness to pay?
  • Identify the different ways inflationary pressure can affect your business
  • Assess ways to improve the capital structure. Are you able to find additional capital if needed?
  • Identify and implement ways to improve internal efficiency and/or reduce waste

“This isn’t a list of everything companies could do, but these are the essential start-up actions with maximum impact,” said Mike Ward, global head of consulting at Grant Thornton International Ltd.

“These measures will help businesses get through this difficult inflationary period and make them more resilient to any economic downturn, which is a real risk in the aftermath of inflation.”

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