Queensland's Economic Pulse: Key Insights For Small & Medium Sized Business Navigating 2024 & Beyond

Today’s RBA decision to hold official rates, a change of government and the on-going and compounding cost of living pressures on Queensland’s households gave us pause for thought.

The Queensland economy in 2024 presents a mixed landscape for small and medium-sized enterprises (SMEs). With an economy valued at over $500 billion, Queensland has outpaced national growth historically due to sectors like mining, service industries, and robust population expansion. At the moment business “feels” tough, not a day goes by without hearing about businesses going into administration, news stories on crime and politicians saying they are “helping reduce the cost of living” but we all know that with the Olympics ahead and surging population growth the future looks bright. It’s a strange feeling, so many challenges and shifting market dynamics require SMEs to tread carefully yet optimistically.

Today the Reserve Bank of Australia's (RBA) decision to hold the cash rate steady at 4.35% for the eighth consecutive time injects further complexity into the economic landscape for Queensland SMEs. The on-going  pause reflects persistent inflation concerns driven by federal and state government spending and a fairly resilient economic backdrop, supported by stable unemployment at 4.1%. The RBA's cautious approach contrasts with recent rate cuts by other central banks, their only mechanism to counter balance compounding inflation. Queensland Treasury​, SmartCompany

Business owners should prepare for an ongoing high cost of capital based on borrowing costs at least into mid 2025, as forecasts suggest the next potential rate change will not come before February, contingent on economic data and household and government spending trends​ .SmartCompany

Today’s Reserve Bank decision gives us pause for reflection on the medium-term situation, considering other elements of the data mix.

Key Economic Indicators for Queensalnd

Economic Growth: Projected growth for 2023-24 is strong at 3%, surpassing the 2.3% achieved in 2022-23. This outlook is supported by positive migration trends and a resilient service sector, which continues to contribute significantly to state output​.  Queensland Treasury, ​Money.com.au

Employment: Queensland's current unemployment rate stands at approximately 4.1%, reflecting relative economic resilience​. Queensland Treasury, SmartCompany

SMEs play a significant role in the state's labour market, employing over 66% of the private workforce, equating to more than 1.7 million people​ Qld Government Stat Office. Certain sectors face challenges in workforce recruitment, particularly industries like construction, healthcare, and technical services report difficulties finding skilled employees due to both high demand and competition with larger firms​ Australian Bureau of Statistics, Qld Government Stat Office.  This tight labour market pressures SMEs to enhance their appeal through competitive wages, training opportunities, or flexible work arrangements. All adding to the cost of doing business.

Inflation and Costs: Inflation remains a concern at 3.8%, reflecting pressures that stem from growing supply chain costs, electricity cost, insurance, real estate and wage increases as well as domestic policy impacts. Coupled with a high cash rate of 4.35%, these factors elevate borrowing costs for businesses​. Queensland Treasury, Reserve Bank of Australia The cost of capital, only a short time ago was negligible it now serves a major barrier to growth.

Wage Growth and Earnings: SMEs face rising wage expenses, with growth at 4.1% across sectors. While this indicates stronger consumer spending potential, it also stresses operational budgets​. Reserve Bank of Australia

A New Government

The recent election in Queensland saw the Liberal National Party (LNP) come to power, introducing new strategies poised to affect the state’s business environment. The LNP's agenda under Premier David Crisafulli has promised to create an SME-friendly landscape. They claim to illustrate this by taking policy actions that focus on their role as a customer in fast-tracking payments for government suppliers, boosting cash flow through immediate payment of invoices under $10,000. This initiative addresses critical cash flow challenges for smaller enterprises. We are yet to see what initiatives they will take beyond this example on how they are going to create this landscape. The Libertarian in us would hope they drive down bureaucratic and legislative barriers to doing business and actively encourage sectors to flourish. We shall see.

Crime prevention is another key focus, relevant to SMEs impacted by break-ins and associated insurance cost blowouts. The LNP has outlined a $40 million Secure Communities Partnership Program designed to improve safety measures like CCTV and lighting in business districts. This may alleviate the operational costs linked to security concerns.

In terms of business skills development, the LNP plans to introduce micro-credential courses for SME owners, aimed at enhancing resilience and strategic growth capabilities. Additionally, regional startups may benefit from proposed innovation hubs, supporting growth in less urban areas.

These initiatives however small should be seen to signal opportunities for SMEs in terms of cash flow improvement and skill enhancement but come amid broader policy shifts that businesses will need to navigate carefully​. We shall need to wait as it is not clear at all if and when a New government will deliver any positives for business. LNPwebsite, Rowland, SmartCompany

Business Sentiment and Productivity

Business Confidence: Sentiment among Queensland SMEs is cautiously positive yet varied by industry. Sectors like construction, professional services, and health show steady growth, with construction leading SME representation at 17.4% of the total​. Queensland Treasury, Qld Government Stat Office

Challenges: SMEs report significant operational cost increases, intensified by supply chain disruptions and higher input prices, notably in retail and food services. These disruptions align with persistent national challenges​. Australian Bureau of Statistics, Money.com.au

Productivity: The state’s diverse economic base—including agriculture, real estate, and emerging tech—provides avenues for growth. Yet, businesses must enhance efficiencies to counteract cost pressures.

Opportunities for Growth

Population Growth: Continued interstate and international migration boosts demand in key service sectors. This demographic shift supports SMEs in retail, real estate, and health​. Queensland Treasury, Money.com.au

Sector Strengths: Beyond construction, health services and technical professions are thriving, driven by both structural demands and post-pandemic recoveries. SMEs in these areas can leverage the skilled labour influx​ from interstate. Money.com.au, Qld Government Stat Office

Strategic Outlook: In our opinion businesses that adapt to the changing conditions through rigorous planning, cost discipline and strategic investment such as digital transformation, continuous improvement programs and maintaining relevance via marketing investment (when their competitors don’t) stand to benefit over the long term.  At MCP we feel now is the economy where a number of long-term success stories will lay down their foundations of  success.  The future does indeed look good in Queensland, but the time is now to get your business in the shape required.

Areas of Concern

Interest Rates and Borrowing Costs: The RBA’s elevated cash rate maintains the high cost of capital with no certainty as to when relief will come, straining expansion plans​. This, coupled with inflation in input costs, tightens margins. Reserve Bank of Australia

Operating Costs: Higher wages and non-discretionary expenses impact profitability, especially in service-heavy sectors​. The ending of the short-term relief of government electricity rebates is a big watch out for business.  We expect significant increases on all input costs as a result in late 2025.  Be prepared. Money.com.au

Starting in 2025, small and medium-sized businesses that work with larger companies (like chain retailers, mining companies etc) may need to track and share their carbon footprint. Similar to how businesses supplying large businesses have had to document and audit supply chains to feed into modern slavery declarations you’ll need to be on top of this as it has the potential to put profitable relationships at risk. You’ll need to factor the cost of this into your operating model and see if you can pass this on, no doubt creating another inflationary aspect to input costs.

Supply Chain and Global Trends: Persistent supply chain issues and geopolitical factors continue to pose risks to stability, particularly for SMEs reliant on imports​.  We feel if you have not looked at diversifying your country of origin it something you should assess.

Australian Bureau of Statistics, Money.com.au

While Queensland’s economic environment presents growth opportunities, SMEs must remain vigilant and adaptive. Managing costs, enhancing productivity, and seizing opportunities in resilient sectors are crucial strategies.

Marlton Capital Partners: Empowering Your Growth

At Marlton Capital Partners, we are dedicated to helping SMEs in South East Queensland achieve their growth potential through strategic equity partnerships. Our approach is centred on creating value and guiding growth. We understand the unique needs of SMEs and are committed to providing the support you need to thrive.

If you are looking to build your business, consider how an equity partnership with Marlton Capital Partners can drive your business growth. With our expertise and resources, you can unlock new opportunities and achieve your business goals.

To learn more about how Marlton Capital Partners can support your business with equity partnerships, visit our website at www.marltoncapitalpartners.com.au and contact us today.