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It takes a lot of energy to make the briefest of outfits. Budgy Smuggler owner Adam Linforth said the monthly power bill at its factory in St Peters in Sydney’s inner west, where the company makes swimwear and accessories, had risen 40 per cent in the past year.
Linforth said rising energy prices were costing the company an additional $1000 a week.
“If you’re making stuff, you need power,” he said. “This is unavoidable and a compounding challenge that we’re having to manage as it comes.”
Budgy Smuggler owner Adam Linforth believes his company will navigate upcoming challenges such as the threat of recession thanks to its loyal customer base.Credit:Wolter Peeters
Spiralling energy costs are just one of the challenges faced by small business owners following the COVID-19 crisis, which continues to have lingering effects through supply chain disruptions, skills shortages and deferred debts.
The federal government’s sweeping changes to Australia’s workplace laws are now adding to the uncertainty with business groups and some crossbench MPs raising concerns about the impact on the small business sector, which contributed almost $418 billion to GDP in 2018-19 – about 32 per cent of Australia’s economy – and employed 4.7 million people.
Federal Labor’s Secure Jobs, Better Pay bill, which will be introduced for debate into Federal Parliament on Tuesday, includes a greater role for the Fair Work Commission to determine requests for flexible working hours and multi-employer bargaining across a range of industries.
Budgy Smuggler owner Adam Linforth at his swimwear company’s factory in St Peters in Sydney’s inner west.Credit:Wolter Peeters
The government hopes the strengthening of multi-employer bargaining will eventually lead to pay rises in other low-paid sectors, but employers are worried IR changes will lead to increased costs and widespread industrial action.
Small Business Women Australia founder Amanda Rose said small business owners did not have access to the level of expertise needed to understand and navigate complex IR laws.
“Small businesses may be left spending their time stuck in a complex system dominated by unions and lawyers,” she said.
“The ripple effect of the proposed changes would simply result in small business owners reducing staff levels, cutting back hours or simply closing their doors as it is no longer viable to run.”
But Australian Council of Trade Unions secretary Sally McManus said claims that small businesses would be covered “on any scale by multi-employer bargaining is simply untrue and frankly ridiculous”.
“There is a scare campaign being waged by big business who do not want to give their workers pay rises to try and stop or delay Labor’s bill,” she said.
Linforth said the proposed industrial relations changes were “a total surprise”.
“It’s odd that this is where the attention has gone when things like tax reform are badly needed,” he said. “One battle at a time though. Right now, this isn’t a priority for us, but it’s another concern on the radar.”
Ongoing skills and labour shortages are the main hangover from the COVID-19 crisis, according to Business Sydney executive director Paul Nicolaou.
“Supply chains have also failed to return to pre-pandemic levels and cost of raw materials have continued to be elevated – will worsen due to current statewide flooding pushing up food costs, ” he said.
Nicolaou said energy costs were increasingly a major concern for businesses of all sizes, especially in energy-intensive manufacturing industries and construction.
“Some of these costs can be passed onto consumers but also continue to squeeze profit margins for small businesses still recouping Covid lockdown losses,” he said.
Linforth said retail stores in Bondi and Manly were impacted during the pandemic, but customers made purchases online and the company also began making face masks “and most recently we have made another pivot to undies”.
Budgy Smuggler had “some pricing room” to pass on rising costs because Australian shoppers supported locally made goods, he said.
“But they’re often the same people, like us, with rising mortgages and power bills to pay, so there are limits,” he said.
The rising cost of manufacturing in Australia and competing with cheap imports is the main concern of Leigh Rust, whose northern beaches-based company Safetyline Jalousie makes louvre windows.
Business had not returned to pre-Covid levels because overseas manufacturers were able to offer lower prices, he said.
“That, combined with builders making decisions to change design plans by using cheaper products for their own cost savings, has been the biggest issue for us,” he said.
Rust said proposed IR changes would create an “even more unlevel playing field against offshore manufacturers who do not have to play by the same rules”.
Rose said business activity had not returned to pre-Covid levels and many small businesses were struggling with rising costs and wage demands.
“With the ongoing increase of super, cost of living, supply chain costs, Covid debt all resting on their shoulders, to then ask them to increase wages for the exact same job is only going to push them into the red,” she said. “It won’t be long before that results in shutting their doors and each staff member losing their job.”
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