“Most businesses remain profitable, despite the ongoing pressures,” the Reserve Bank of Australia (RBA) has reported in its latest Financial Stability Review.
“Most large and small businesses’ profit margins are around the level recorded over the 2010s. However, our measure for small businesses is only available up to the September quarter of 2024. Additionally, the surveys suggest these businesses have faced increased pressure on their profitability since then.” Additional measures – such as the share of businesses experiencing growth in profits or conversely making losses over the past year – are also around the average of the 2010s.”
Economic factors such as subdued growth in economic activity and high input costs have made conditions challenging for many businesses.
The RBA’s research found that many businesses have struggled to pass on higher input costs to customers. They have therefore resorted to cost-cutting measures to remain profitable.
However, many businesses have achieved sufficient revenue growth to offset increased labour and non-labour costs over the past year or so.
“Most businesses have maintained robust balance sheets, providing an important source of resilience. Businesses’ ongoing profitability has allowed them to avoid depleting their cash holdings or taking on additional debt to manage cash flow pressures,” the RBA said.