A third of Illawarra businesses to cut staff as confidence drops

This comes after the federal budget was handed down on Tuesday, receiving a tepid response from businesses and industry.

While the Albanese government and Jim Chalmers was praised for investments in green manufacturing and energy bill relief for businesses, KPMG Wollongong partner Adam Cole said there was otherwise little for businesses to celebrate.

"There's very little in the budget from a business perspective," he said.

Businesses in the Illawarra are most concerned about the cost of insurance, followed by wages and supplier costs, the upcoming Business Conditions survey from Business NSW will reveal.

Confidence has fallen further into negative territory, with the Business Confidence Index dropping from -42.9 last quarter to -64. A score of 0 indicates businesses are neutral about their future outlook.

In this environment, more than a third of businesses expect to lay off staff in the next three months, while just over half will keep their headcount the same.

Only 12 per cent intend to hire additional staff.

The outlook follows a jump in the unemployment rate for the Illawarra, after the region recorded record low figures following the COVID pandemic.

Across the country, unemployment was up in April, rising from 3.9 to 4.1 per cent. However participation also grew, meaning the total number of jobs increased over the month as more people went looking for work.

"The 30,000 people increase in unemployment reflected more people without jobs available and looking for work, and also more people than usual indicating that they had a job that they were waiting to start in," ABS head of labour statistics Bjorn Jarvis said.

"The increases in both employment and unemployment in April saw the participation rate up by 0.1 percentage point to 66.7 per cent in April. It has been relatively high, above 66.5 per cent, since March 2023."

This was a point noted by assistant treasurer and Whitlam MP Stephen Jones, who said Australia's labour market was the envy of the world, on par with the United States and ahead of the Eurozone and the OECD average, and local businesses were in fact grappling with skills shortages.

"When we see one person out of work, that's something we want to work on," he said.

"The big challenge is focusing on an uplift in skills, additional fee-free TAFE places, and this budget is directed at that skills shortage and we've got more to do across the entire economy."

Business Illawarra interim director Paula Martin said there were skills shortages in medium-skilled and highly advanced technical roles.

"We will continue to see a gap in those technical roles, and it's a holistic problem, is our education system set up to help us with these new and emerging practices and are businesses well-prepared with technology enablement to offer the types of roles that we're teaching for."

With opposition leader Peter Dutton using his budget reply speech to double down on Labor's push to reduce the migration intake, both Ms Martin and Mr Cole said Australia needed a well-calibrated migration strategy, that supported the intake of migrants with in-demand skills without adding to the housing shortage in the Illawarra.

"It's not going to be an easy issue to solve, and it's going to require all levels of government and the private sector," Mr Cole said.