The annual pre-Budget survey of our mid-market client base by KPMG Enterprise this year took place just months before the Federal Budget which will be handed down on Tuesday, 9 May 2023.
Our survey of over 160 leaders in Australian businesses – ranging from listed companies just outside the ASX 200, to private companies, family businesses, and some public sector organisations – shows a majority in the mid-tier sector (the backbone of the national economy) are feeling optimistic they will see growth of at least 5 percent in the next three years. The two top challenges for mid-market businesses in the next 18 months are again cost and margin pressure and the recruitment and retention of skilled staff, although they have switched in priority order. Rising inflation and interest rates are secondary challenges for all mid-market businesses.
Summary of key findings
1. Economic sentiment
- Fifty-five percent of mid-market businesses feel optimistic they will see growth in the next three years of up to 5 percent.
- This represents a decline since last year (67 percent in 2022 vs 55 percent in 2023) with an increase in businesses who feel neutral or pessimistic about the prospect of business growth.
- Over half (54 percent) predict moderate wage growth of up to 4 percent, while 30 percent believe wages will rise between 4-8 percent in the next 12 months.
2. Business and sector challenges
- The two top challenges for mid-market businesses in the next 18 months are again cost and margin pressure and the recruitment and retention of skilled staff, although they have switched in priority order. Cost and margin pressure is a challenge for an overwhelming number of businesses in the Corporates sector (65 percent), as is consumer spending habits (38 percent). Rising inflation and interest rates are secondary challenges for all mid-market businesses. Fifty-two percent of survey respondents think sector growth can be boosted by the re-establishment of critical manufacturing in Australia and 45 percent supporting major tax reforms.
- Thirty-two percent of businesses in the Government and not-for-profit industry endorse tax reform. Compared to last year, tax reform has slipped down in priority for some businesses.
3. Debt repayment and taxation attitudes
- Seventy-five percent of businesses have a pragmatic view on their own debt levels being low or manageable if interest rates rise further in 2023.
- With the rise in interest rates, 81 percent of survey respondents believe it is time the Government focuses on significant debt repayment, with 55 percent wanting the debt to be managed through economic growth and increased productivity.
- There are mixed levels of concern on the influence of the ATO on businesses. Fifty-two percent of businesses claim to be prepared for any ATO review; however 20 percent believe now is not the time to add further burdens to business.
KPMG Customer Intelligence conducted a pulse check on behalf of KPMG Enterprise. This pulse check was targeted at clients who run mid-market firms, aiming to gauge sentiment around key issues before the 2023/24 Federal Budget is announced.
Australia’s mid market is often referred to as the engine room of the nation’s economy, employing nearly a quarter of all Australians, and responsible for almost 40 percent of Australia’s business revenue.
The survey was completed by over 160 mid-market business directors and decision-makers. Most respondents were from private companies, however there were also some from publicly listed companies, family businesses and NFPs. Respondents also came from a range of industry sectors, however the majority were from manufacturing, banking and financial services, retail or health and human services.
The survey results are a valuable indicator of Enterprise clients’ opinions concerning the current business and budget environment.
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