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Victoria is the only state where new business starts have declined from 2021 levels
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Government policies, labour market shortages and supply chain dynamics significant factors affecting productivity
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Removal of stamp duty exemptions, Foreign Buyers Duty and increase in payroll tax contributing to an unfavourable business climate
Victoria risks losing even more business investment and inflicting further damage on its economy unless the Government takes substantive actions in its Budget to make the State an easier place to do business. The latest data from Australian Bureau of Statistics, released late last year, shows a net decrease of more than 7,600 businesses in Victoria in 2022-23,the only state or territory to record a decline in that timeframe.
Analysis by the Institute of Public Affairs released in February shows Victoria is the only state where new business starts have declined from 2021 levels, and more businesses are exiting or closing in Victoria than anywhere else.
Craig Whatman, Partner at Pitcher Partners Melbourne, said that Victoria was once labelled ‘the place to be’ but that tag is being challenged from a business perspective.
“In the wake of last year’s State Budget, ANZ chief executive Shayne Elliott described Victoria as being one of the toughest places to do business,” Mr Whatman said. “That is a very disappointing label and the State Government must take all actions available to change and encourage business investment.”
The Pitcher Partners Business Radar, which tracks the sentiment of business leaders across the country, noted that the outlook for growth prospects had faded compared to mid-2023. In the recently released Business Radar, Government policies were seen as a leading external factor impacting productivity for middle market business, followed by labour market shortages and supply chain dynamics.
Common sentiments among respondents were around the increasing compliance cost and administrative burden associated with red tape and negotiating complex regulations. Among the measures often cited as discouraging property investment in Victoria were the removal of stamp duty exemptions for off-the-plan buyers and the Foreign Buyers Duty (FBD) that comes on top of the regular stamp duty and levied at 8 per cent in Victoria.
In addition, an increase in payroll tax that will kick in from July 2024 will impact 4,000 of the state’s largest businesses.
“If the cost of doing business becomes too expensive, investment will go elsewhere and that is exactly what we are seeing in Victoria,” Mr Whatman said. “Consultation is improving but it must be linked to genuine tax reforms because the prevailing sentiment is that governments are not doing enough to invite investment.”
