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Operating costs hurting new business

Australia’s high operating costs are stunting new business growth, according to RSM, the seventh largest global network of independent audit, tax and advisory firms.

News Michael Masterman 18 June 2014
— 1 minute read

Australia’s net rate of business creation grew by just 0.4 per cent in 2013, and Neil Cribb, partner and national head of the turnaround and insolvency group of Australian firm RSM Bird Cameron said going forward, he expects to see a continuing decline in net business creation.

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“This comes as a result of the continuing pressure of high operating costs for most Australian businesses, particularly when compared to our Asian neighbours,” he said.

“A particular case in hand is the manufacturing sector, as evidenced by the necessary restructure of the Australian motor vehicle industry, which has struggled to be competitive over an extended period even with extensive industry and government consultation and support,” added Mr Cribb.

Construction was the leading source of business churn in Australia from 2008 to 2012, with more than 400,000 companies created or wound up, while manufacturing saw the lowest aggregate business churn with just 83,000 births and deaths.

Jean Stephens, chief executive of RSM, said the most active sectors in terms of business creation are those which have relatively low barriers to entry, like wholesale and retail trade and professional services.

Financial services accounted for the highest level of net business formation (nearly 18,500 organisations) from 2008 to 2012.

“However, nearly a third of the countries we reviewed exhibited a decline in the number of active enterprises,” she said.

“Creative destruction and the reallocation of capital to more efficient existing and new businesses will have a large part to play in this process, but the global economy remains fragile.

“The watch phase for the next year must be no more than cautious optimism as individuals and companies respond carefully to government actions and macro indicators,” said Ms Stephens.

Operating costs hurting new business
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