NSW Business Confidence Rebounds, but Costs and Red Tape Stifle Growth

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Business confidence in NSW has surged to its highest level in three years, but the state’s peak business body warns that rising costs, skills shortages and regulatory burdens continue to choke productivity.

The latest Business NSW Business Conditions Survey reveals a staggering 97 per cent of businesses are struggling to improve productivity. Rising costs top the list at 65 per cent, followed by access to skilled labour (42 per cent) and regulatory burdens (41 per cent)

Business NSW CEO Daniel Hunter says the Government must act to turn confidence into growth.

“Productivity was front and centre at the Government’s Economic Reform Roundtable in August but talk alone won’t cut it,” Hunter says. “Businesses need real, tangible reforms that tackle the triple threat of costs, skills shortages, and red tape.”

Despite the challenges, clear signs of recovery are emerging. NSW business confidence has hit a three-year high, with expectations for the next quarter higher still.

“The figures are encouraging,” Hunter says.

“Confidence is returning, but to sustain this momentum, we must remove the barriers holding businesses back. That means urgent reforms like overhauling workers’ compensation and cutting payroll tax to ease cost pressures and support growth.”

The Business Confidence Index jumped to -40.0 in Q3 2025, up from -50.8 last quarter. Although still negative, this signals a turnaround, with next quarter’s outlook rising sharply to -12.0, the highest since September 2021.

Businesses continue to nominate rising insurance premiums as the number one cost concern, with the Emergency Services Levy adding about 25 per cent to the average premium.

“Removing this levy would be a clear, practical step to reduce expenses and give businesses much-needed relief,” Hunter says.

“Energy costs have also remained high for the second-straight quarter, making it clear that state and federal governments must take action to lower the cost of gas and electricity."

The survey shows 25 per cent of businesses reduced staff in the past three months, but 84 per cent plan to maintain or grow their workforce next quarter. While the employment outlook is weakest in accommodation and food services, where 28 per cent expect to reduce headcount, businesses overall report stronger ability to cover expenses — 57 per cent can now cover a month’s costs through credit or loans, compared to 40 per cent a year ago.