Customers spending less as businesses pinched by Iran war crisis
Australians are spending less even though the worst effects of the Middle East fuel crisis have passed, new data has revealed.
The Australian Chamber of Commerce and Industry’s second fuel supply crisis report found 55 per cent of businesses surveyed by chambers of commerce in NSW, Victoria, South Australia and Queensland reported weaker customer spending in April.
This is an increase compared to the 43 per cent of businesses who reported reduced spending in March despite the fuel excise tax cut coming into force on April 1.
Of more than 700 businesses surveyed in four states between April 6 and 20, nearly 30 percent reported experiencing serious or significant impacts from fuel costs; This rate is lower than 46 percent in March.
But 94 percent of businesses still reported some type of impact.
David Alexander, the chamber’s acting chief executive, said high fuel prices and interest rates were “placing clear pressure on consumer confidence and restricting households’ discretionary spending”.
According to the survey, the business world was also affected by the crisis.
The number of businesses reporting that they are covering higher fuel costs increased from 61 percent to 69 percent in April.
The proportion of businesses postponing investment or expansion also increased from 31 percent to 38 percent, while more than 60 percent cut back on non-essential expenses.
“The economic impact of disruptions to global fuel supplies continues and will continue to burden Australian businesses for some time,” Mr Alexander said.
“This is a worrying signal. Businesses withdrawing from investment will impact economic growth in the months and years to come.”
The report came before US President Donald Trump on Saturday night announced an imminent peace deal with Iran that would include the opening of the Strait of Hormuz.
Iran’s closure of the strait, through which about a fifth of the world’s crude oil transits, has had a significant impact on fuel prices in Asia and the Pacific and sparked fears about continued supply, including refined diesel and fertiliser.
The report called for continued policy support for businesses and temporary improvements in fuel prices that translate into “sustainable improvement in business conditions and wider economic activity”.
Nearly 63 percent of businesses said fuel costs increased shipping and transportation costs, while 43 percent said they caused cash flow pressure.
More than 60 percent said they had reduced non-essential spending to cope with the crisis, while 36 percent said they were passing the costs on to customers.
