This article is from the Australian Property Journal archive
SUPPLY chain issues have eased and are expected to be less problematic in the next 12 months, although one in four small to medium enterprises (SMEs) are still reporting supply chains as a “significant” issue for their business.
NAB’s latest Economic Business Insights – SME Supply Chain Update shows half of SMEs are “very” or “extremely” likely to increase their use of Australian-based suppliers and over four in 10 would support new local start-ups.
The survey of 760 SMEs showed the 26% of SMEs that believe supply chains to still be a “significant” issue in the September quarter was down from 31% in the previous quarter, while those that believe supply chains will remain significant issues over the next 12 months was down from 31% to 24%,
“The easing in global supply chain disruptions and rebuilding of inventories, raises the prospect of a fall in inflation. Freight rates have substantially unwound, supplier delivery times and order backlogs are normalising and some retailers, faced with excessive stock, are now moving to discount prices,” said report authors Dean Pearson, NAB’s head of economics, and Robert De lure, associate director – economics.
“Whether this will see a rapid decline in inflation or only partially offset now broad-based inflation is an open question.”
Supply chain issues in the last three months were biggest in Tasmania, and next highest in Western Australia and Victoria. It was lowest in South Australia and also had a smaller impact in NSW and Queensland. SMEs in all states expect supply chain issues to improve in the next 12 months, except Tasmania.
By industry, supply chains remain a “significant” issue for 44% of wholesale SMEs, and for around one in three in retail, construction, and manufacturing, where it fell heavily from 48% in the June quarter.
The number of firms who reported “significant” issues was lowest in finance and insurance, at just 5%, closely followed by property services and health.
Fewer SMEs in all sectors experienced “significant” supply chain issues during the period, bar business services where the number that did so climbed from 2% to 9%.
Almost 4 in 10 (38%) wholesale firms believe supply chain will still be a “significant” issue for their business in the next 12 months, compared to just 5% in the finance and insurance sector.
Fewer firms in all sectors expect to experience “significant” supply chain issues in the next 12 months, except in business services.
Pearson and De Lure said many countries are increasing domestic sourcing to combat supply chain issues.
“This is helping to jump-start investment in additional production capacity. Some firms are also nearshoring – i.e. relying on suppliers that are geographically closer to production facilities to reduce transport costs, time and risk.”
Investing in Australian-based manufacturing is also widely seen as a key way of addressing supply chain issues. Just over half of SMEs said they were “very” or “extremely” likely to increase their use of Australian-based suppliers, rising to almost seven in 10 among construction and accommodation, cafés and restaurants businesses.
By state, South Australian businesses are most likely to increase their use of local suppliers (64%).
Encouragingly for those considering establishing new manufacturing operations in Australia, 44% said they were “very” or “extremely” likely to support new local start-ups, including 54% in the construction sector.
