Melbourne’s economy is struggling. The Australian Bureau of Statistics (ABS) reports that Victoria lost 7,606 businesses during the 2022-23 financial year. High costs and state taxes forced many companies to move to other states or countries. Meanwhile, Queensland gained 11,031 new businesses in the same period.
Business Exodus from Victoria
Melbourne’s economy is struggling. The Australian Bureau of Statistics (ABS) reports that Victoria lost 7,606 businesses during the 2022-23 financial year. High costs and state taxes forced many companies to move to other states or countries. Meanwhile, Queensland gained 11,031 new businesses in the same period.
Reasons for the Decline
There are two main reasons for this decline in Victoria. First, the strict Covid-19 lockdowns closed many small businesses like cafes, personal trainers, and boutiques. Second, the 2021-22 State Budget added a payroll tax for businesses with a payroll over $10 million. The 2022-23 State Budget then increased this tax to pay off debt from the pandemic.
Companies Considering Relocation
A worker from a company worth over $10 million mentioned that their business is considering moving from Melbourne to Brisbane due to lower payroll taxes. Additionally, the Victorian government plans to raise WorkCover premiums, which businesses must pay if their employee compensation exceeds $7,500 or if they hire apprentices or trainees.
These premiums went up by 42% in May 2023, from 1.27% to 1.8% of employee compensation. The Victorian Parliamentary Budget Office estimates this will cost businesses $17.8 billion over the next decade.
Office Vacancy Rates
Melbourne’s office vacancy rate has risen to 19.6%, the highest since 1995. In the June quarter, the city had a negative net absorption of 26,600 square meters, meaning more office space was left empty than newly leased.
Challenges for Businesses
ANZ CEO Shayne Elliott called Victoria one of the hardest places to do business. The ABS data supports this, showing many businesses moving to Queensland.
Bleak Outlook for Office Market
Steve Urwin from tenant advocacy firm Kernel Property gave a bleak outlook for Melbourne’s office market: “Melbourne is on a decline and hasn’t hit bottom. Worse is yet to come.”
Investor Perspective
Investor Shane Quinn, head of commercial property syndicator Quintessential, described Melbourne’s CBD office market as “a real mess” and expects it to remain that way for the next five years.
