Regional Development Australia Northern Inland survey reveals impact of the drought on non-farm businesses

BUSINESSES ARE HURTING: RDANI executive director Nathan Axelsson and senior research economist David Thompson in front of an empty Armidale shopfront, typical of the wider region.
BUSINESSES ARE HURTING: RDANI executive director Nathan Axelsson and senior research economist David Thompson in front of an empty Armidale shopfront, typical of the wider region.

Only five per cent of non-farm businesses in the northern inland region of NSW have reported a turnover increase this financial year, while just under half have been forced to lay off staff as a result of the drought, according to a survey about the effects of the drought on regional businesses.

With much of the drought focus on farmers and farm businesses, Regional Development Australia Northern Inland (RDANI) has been undertaking a survey to get the data to show just how much the big dry has impacted on the business sector in the region, and what might be done to help.

Narrabri-based RDANI chair Russell Stewart said so far the survey, which has had more than 300 responses, is revealing that non-farm businesses are the forgotten casualties.

"Our northern inland economy is heavily dependent upon agriculture with 16 per cent of output and 15 per cent of employment coming from that sector, but when farming businesses suffer, so does the rest of the economy, as the cashflow to all the service and support sectors is impacted dramatically," he said.

Mr Stewart said RDANI welcomed the federal government's latest drought assistance package, announced on Thursday, November 7, however believe it lacks "genuine understanding" from politicians in Canberra.

"It shows that the economic realities in drought affected communities are not understood in Canberra," he said.

"[Thursday's] package includes loans of questionable value for what the government has referred to as farm-dependent businesses. This refers to agricultural sub-contractors and rural suppliers.

"The definition must be broadened to cover all non-farm businesses in acutely drought affected communities.

"Our CBDs are in decline. Drought assistance is largely focused on farm enterprises and the latest drought package proves that the devastating economic impacts that the drought has had on other regional businesses remains unrecognised and undervalued."

RDANI senior project officer David Thompson said the incomplete picture of the economic impacts of the drought became apparent after broad engagement with businesses throughout the region.

"During the course of our work we meet business owners across all sectors of our local economies, not just the farmers," he said.

"Media coverage picks up on the obvious images of desolate paddocks, dry dams and hand-fed stock, yet the flow-on impacts to our other regional businesses is far less visual or newsworthy, but just as important. We decided to survey non-farm businesses to see how they are faring in the drought and what type of assistance they said would be most beneficial to them."

So far, 305 non-farm businesses have responded to the survey, answering questions about changes in turnover and staffing levels, and the types of government policy actions which would help them survive this and future droughts. Feedback came from all sectors of the economy, with particularly high responses from retail businesses, businesses which support agriculture and food and accommodation providers.

"The survey will close on November 15, and we have commenced collating the results," Mr Thompson said.

"To date, we have looked at the impacts of the drought on non-farm business performance, and shortly we will examine what types of assistance these businesses would like provided by all tiers of government."

Results examined so far revealed that the impact of the drought on non-farm business turnover (i.e. sales income) during the 2018-19 financial year was substantial.

Interim results are that 59 per cent of businesses report a turnover reduction in the range of 11-50 per cent; 12 per cent of businesses record a reduction of between 51-75 per cent; and several businesses reported turnover reductions of 76-100 per cent.

Only 5.7 per cent of non-farm businesses reported a turnover increase.

Forward expectations are also poor with 54 per cent of businesses expecting their turnover to be down by 11-50 per cent in the next financial year.

Despite large reductions in sales revenue, impacts on staffing levels were less severe, with almost 50 per cent of businesses reporting retaining all of their staff over recent years.

Mr Thompson said this appears to be a conscious decision by business owners to retain quality staff that they have invested time and money to train and that are good fits to their team. Businesses were more likely to adopt other strategies to remain financially viable than losing staff which is a strong positive for regional communities.

Despite this, 48 per cent of businesses had been forced to lay staff off due to the drought, with 34 per cent reporting a reduction of one to two staff members, and 6 per cent of businesses reducing staff by more than five employees. 51 per cent of businesses expected to retain all staff next financial year, but 34 per cent expected to have to have one to two fewer employees in 2019-20 and 12 per cent expect to have three or more fewer staff.

Allowing clients more time to pay their accounts is a tactic businesses are often forced to adopt during drought conditions in order to support their customers. 42 per cent of businesses reported outstanding customer accounts in the range of $1-30,000, while 11.5 per cent were owed $30,001-$60,000 and 8 per cent of businesses were owed more than $200,000.

"These results illustrate the hardship non-farm businesses are experiencing as a result of the drought," Mr Stewart said.

The survey will remain open until November 15 and can be accessed online at www.surveymonkey.com/r/DroughtImpactOnBusinesses

The survey takes only five minutes to complete and can be anonymous. Non-farming businesses across the region are urged to complete the survey, to enable RDANI to gather evidence for a call to action.