Doing Business in Regional Victoria

During October 2001, VACC held a series of focus group meetings attended by regional VACC members. The purpose of the exercise was to establish first hand from small business owner/operators in regional Victoria what were the immediate business, economic and related socio-economic issues affecting their business operations, their communities, and regional Victoria overall.

The report reads as an important statement of how regional small business is currently faring, but also provides a very useful insight into the strengths, weaknesses, opportunities and threats that regional small business is facing.

The following are the key issues identified by regional small business in Victoria

Key Issues Identified by Regional VACC Members

Structural Cost Inequities

Fuel Costs

The main cost and issue of uncertainty for regional small business is retail fuel price volatility and the average higher price for fuel compared to Melbourne average retail prices.

Freight Costs

Higher fuel costs lead to an overall increase in freight charges and costs which regional small businesses usually need to carry, as regional consumers do not (in general) appreciate price point differences between average Melbourne retail prices and average regional retail prices.

Telephone Costs

There are two areas of concern, both concerning costs. First, the high frequency of STD charges incurred in contacting predominantly Melbourne based suppliers and dealers. Second, level of mobile phone charges, necessary to keep in touch with existing and prospective customers located over wide areas.

Industry Legislation and Administration Burdens

GST Complications

The compliance burden for GST and PAYG needs to be significantly reduced, based on a significant simplification of business tax accounting.

WorkCover

General education and information to small business on WorkCover changes and developments needs to be significantly improved.

Superannuation

The current levels of the taxation on superannuation, and the Superannuation Guarantee applying to employers are both too high. Employees need to make a co-contribution.

Skilled Labour

Skill retention, and attracting young people into the industry, is extremely difficult, owing to competition from other industry sectors, and the lifestyle and higher income level attraction of larger cities (particularly Melbourne).

Apprenticeships

The wage disparity, plus the lure of the 'big city' makes it impractical for regional small businesses to retain and attract young people into the industry through apprenticeships leading onto full time employment.

Social Issues

Poker Machines

Poker machines are 'cash-stripping' local communities. The tax revenue generated should be repatriated back to the local community to offset, in part, the economic damage caused to small business through the fall in the average disposable income.

Price Sensitivity

Regional small businesses are faced with an increasing range of business pressures, including consumer buying behaviour. Consumers are prepared to actively and aggressively haggle on price, based on average Melbourne prices, thereby extracting a significant advantage over regional small business.

Internet Use

The growth of the Internet has provided numerous information advantages for regional small business, allowing almost immediate access to parts ordering and supplier information. But telephony costs are adding to the expense of doing business.

Youth

Regional Victoria needs government assistance to promote and operate inducements to retain young people, often attracted to greater opportunities in the larger cities (including larger regional centres at the expense of smaller centres), for work opportunities and lifestyle.

Declining population and changing demographics

Concerns over young people migrating away from regional Victoria is compounded by concerns over the aging nature of local communities, and the decreased discretionary spending of an aging community.

Structural unemployment

Structural unemployment owing to a decline of heavy industry, and continual downsizing of exiting heavy industry affects the economic, but also importantly the community psychology.

General Regional Business Issues

Government promotion of its small business programs

Governments need to do much more to actively promote government initiated small business assistance programs and measures to regional small business.

Customer Loyalty

Regional small business need to be aware of market conditions, outside their local community boundaries, as regional consumers are actively prepared to buy-in goods and services outside their community, based on price, despite being aware of needing to buy/invest in their local community.

Vulnerability to commodity prices

Regional small business are vulnerable to farm commodity prices, and other seasonal factors, including tourism flow-ons.

Regional Promotion

Regional Victoria is particularly sensitive to the loss, or downsizing of heavy industry, inclusive of large government business enterprises such as Telstra, SEC and other major government departments, and needs additional government promotion of the business benefits of their particular region.

Banking

The closure of branches, and the decline in the traditional one-on-one relationship with a bank manager has reduced the banking industry's understanding of regional small business, and the general level of confidence of small businesses in the banking system.

Government Understanding

There is a lack of confidence in governments in general over their level of understanding of regional issues, and any attention largely committed to regional marginal electorates.

Infrastructure

General business related infrastructure such as roads, schools and telephony services are improving. Hospitals and aged care facilities are also seen to be improving. Internet access is variable among areas.

Industry

Governments, particularly local government, need to improve start up grants and tax incentives to businesses willing to relocate to regional areas, coupled to continuing upgrades in industry and socio-economic infrastructure such as roads and rail services.

Automotive Industry Changes

The Impact of Modern Car Manufacturing and Marketing Practices

Industry issues such as extended new car warranties and a decline in servicing of vehicles over 10 years of age is reducing the amount of work affecting the viability of mechanical repairers.

Industry Protection

The automotive industry lacks appropriate 'industry regulation' with licensing of repairers required to maintain and raise the overall standard of repairs, work quality and roadworthiness of vehicles.

Roadworthy certificates

Vehicle roadworthiness testing particularly of regional based vehicles is necessary.

Full copies of the report can be obtained by phone - 03 9829 1111 - or email -govtandpa@vacc.com.au