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Non-farm businesses, the forgotten drought casualties

Regional Development Australia Northern Inland Executive Director Nathan Axelsson and RDANI’s Senior Research Economist David Thompson in front of an empty Armidale shopfront, typical of the region.
Regional Development Australia Northern Inland Executive Director Nathan Axelsson and RDANI’s Senior Research Economist David Thompson in front of an empty Armidale shopfront, typical of the region.

Non-farm businesses are the forgotten casualties of the worst drought in living memory, a business survey with very strong participation in the Northern Inland region of NSW is revealing, according to Regional Development Australia Northern Inland (RDANI) Chair Russell Stewart.

“We welcome the Federal Government’s drought assistance package announced today but sadly, it is lacking genuine understanding. It shows that the economic realities in drought affected communities are not understood in Canberra. Today’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,” Mr. Stewart said. “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,” Mr. Stewart said.

For RDANI Senior Project Officer David Thompson, 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 15th, and we have commenced collating the results” said Mr. Thompson.  “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% of businesses report a turnover reduction in the range of 11-50%, 12% of businesses record a reduction of between 51-75%, and several businesses reported turnover reductions of 76-100%. Only 5.7% of non-farm businesses reported a turnover increase. Forward expectations are also poor with 54% of businesses expecting their turnover to be down by 11-50% in the next financial year.

Despite large reductions in sales revenue, impacts on staffing levels were less severe, with almost 50% 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% of businesses had been forced to lay staff off due to the drought, with 34% reporting a reduction of 1-2 staff members, and 6% of businesses reducing staff by more than 5 employees.  51% of businesses expected to retain all staff next financial year, but 34% expected to have to have 1-2 fewer employees in 2019-20 and 12% expect to have 3 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% of businesses reported outstanding customer accounts in the range of $1-30,000, while 11.5% were owed $30,001-$60,000 and 8% 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.  “Our Northern Inland economy is heavily dependent upon agriculture with 16% of output and 15% 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.  As we further analyse these results, we will also reveal some practical ways in which governments can assist non-farm businesses during this drought”.

RDANI Executive Director Nathan Axelsson said the survey will remain open for input until November 15th and can be accessed through RDANI social media or directly, at:
https://www.surveymonkey.com/r/DroughtImpactOnBusinesses

“If you're a Non-Farming Business in the region please fill out the survey so that we can gather evidence for a call to action. It'll only take five minutes and can be completely anonymous. We look forward to getting the results in the hands of policy-makers, who appear to be floundering with reactive stop-gap measures at present” he said.

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