All hands on deck says CCA as rocketing fuel prices hit charities already running on fumes

CCA has lodged a submission with the federal government underlining the economic value of the third sector and the size of its workforce, and outlining ways in which dramatically higher fuel prices can damage it, even as it is already under stress.

The sudden fuel supply crisis is also threatening the viability of small to medium enterprises (SMEs), according to insolvency expert Greg Bartels from Halo Advisory, while market research agency Nature has reported that the level of anxiety and concern felt by Australians about cost-of-living pressures is now on par with what was felt at the peak of the covid pandemic.

Crosbie told the Community Advocate it was essential for the charity and NFP sector to lobby to ensure governments factored its needs into their response to the crisis.

“We know some of our members are now doing scenario planning in preparation for what could be a difficult period in Australia and globally,” he said. “All charities and NFPs need to start thinking about how a national fuel shortage might impact them, and plan appropriately.

“Farmers, retailers, and transport and accommodation providers are already heavily lobbying the government,” he said. “It’s important that we have a place at the national policy table and the impact on our sector (and on the communities we serve) is factored into any forward planning.”

Asked by the Community Advocate what was being done to support the charity sector, Charities Minister Andrew Leigh acknowledged the need for charities to use transport in their work, while pointing to the wider view of what the federal government is doing to manage the fuel situation.

“Whether it’s helping our vulnerable, providing meals, caring for the environment or helping people stay active, charities play a fundamental role in Australian communities,” he said. “We know many not-for-profit organisations rely upon transport to do their important work, which is why we’re ensuring they can continue to access the fuel they need.

“The government has empowered the ACCC to protect motorists from unfair price rises, boosted fuel supply by releasing 20 per cent of the baseline Minimum Stockholding Obligation for petrol and diesel, and will appoint Anthea Harris as fuel supply taskforce coordinator to support coordination across governments and sectors,” he said.

“We are also getting more fuels into the Australian market by temporarily amending the fuel standards and working closely with industry and states and territories to ensure fuel gets where it is needed most, particularly in regional communities.”

All hands on deck

In his submission to the federal government, Crosbie said he had faith in Australia’s leaders to navigate the crisis, but he called on the wider sector to be involved in planning.

“CCA believes our governments at every level will be able to steer an appropriate course through what may be very challenging waters over the coming months, but governments cannot do it alone,” the submission said. “Business has a role. Charities and NFPs have a role.

“At CCA we believe the best way to maximise the contribution of charities and NFPs in addressing challenges is to actively engage with the sector to ensure what is needed is being provided. CCA is happy to play a role in this engagement.

“Should the situation deteriorate, it’s charities and NFPs that will again provide the fundamental services that connect people and offer support to those most in need.”

While nobody could predict exactly what will happen with fuel supplies to Australia, the submission said CCA did know that governments “have already begun planning for what could be a difficult time with urgent meetings of the National Cabinet, a new Fuel Supply Taskforce, initial behind-the-scenes planning around possible restrictions and targeted support packages for at-risk businesses and other groups.”

“It’s important to note that charities are a major employer (over 1.5 million staff and 3.5 million volunteers), have a large economic footprint (turnover $220 billion+ per annum and assets above $435 billion), and play a critical role in the lives of millions of Australians and the communities they belong to.”

The challenges for charities and NFPs

Charities and NFPs were likely to suffer from the fuel crisis in a variety of ways, Crosbie said.

The obvious one was increased costs, especially at the petrol bowser.

“Many [charities] need to use transport in their service provision, and many rely on goods and commodities that are likely to substantially increase in cost,” the CCA submission said. “Most charities and NFPs are already stretched very thinly to provide their valuable services. Most have very limited budget flexibility. An un-budgeted increase in costs will impact the capacity of charities and NFPs to continue to effectively meet community needs.”

The ability of volunteers or staff to give their time, or even travel to work because of the cost of petrol, could be affected, reducing the capacity of charities and NFPs to continue to meet community needs, CCA said. This was compounded because history suggested the need for charities’ services was also likely to increase, as the wider community struggled with yet more cost-of-living increases, and the anxiety that comes with that, it said.

“The covid experience highlighted that in times of economic pressure, demand for emergency relief and other support services increases significantly,” CCA’s submission said. “Vulnerable people become more vulnerable when new challenges arise, and this can be seen across a broad range of services. Demand for domestic violence support, for instance, is likely to increase if economic pressures rise. An unplanned increase in service demand is very difficult to respond to if there is not an increase in funding for charities and NFPs.”

The submission warned that as Australians grapple with the unexpected spike in costs for petrol and other goods, it was likely that donations, sponsorships and philanthropy would shrink.

“Australia is already seeing a significant drop in consumer confidence and typically this translates into less fundraising and philanthropic income across the charities and NFP sector,” it said. “At a time of rising costs, the likely decline in donations will undoubtedly hit some charities.

“Another source of income for some charities and NFPs is fees for the services they provide. As we saw in the covid pandemic, when people travel less and participate less in group events this can negatively impact the income streams of many charities and NFPs that rely on fee for service type income.”

Finally, CCA warned of the potential medium to long term costs of the fraying of Australian social cohesion because of people’s reduced ability to travel, mix and participate in society, as well as an increase in vulnerable and isolated population groups.

“Charities and NFPs are the backbone of many communities and especially vulnerable population groups,” CCA said. “Charities and NFPs bring people together to provide opportunities to positively engage, build understanding, and offer important services, support and hope. When the pressure on community relationships increases, it’s important that charities and NFPs have the resources they need to ensure individual, family and community resilience is supported and encouraged.

“A reduction in the capacity of charities and NFPs to respond to vulnerable community needs during a fuel shortage crisis would not only lead to more harm, it would also translate into higher costs for governments in the medium to longer term.”

SME insolvency wave could be coming

CCA is not the only organisation warning of the impacts of rising oil prices and other costs.

Greg Bartels, the director of Halo Advisory, a business advisory firm specialising in insolvency, restructuring and turnaround strategies, said pressures on Australia’s small to medium enterprises (SMEs) could lead to an “insolvency wave” if businesses could not absorb the latest of many financial hits.

“Fuel prices don’t just affect transport businesses,” Bartels said. “They cascade through the entire economy – freight, logistics, construction materials, retail supply chains and hospitality. When those costs rise quickly, the pressure flows directly into small business margins.”

Because of their limited financial buffers, SMEs acted as an early warning sign for broader economic distress, he said, adding: “Small businesses are the canary in the coal mine for the economy. Unlike larger corporations that can hedge fuel costs or absorb supply chain shocks, smaller operators often feel the impact within weeks.”

Businesses, like NFPs and charities, were facing three simultaneous pressures, he said: the direct cost of things like ballooning petrol prices, the ongoing stagflation squeeze, and debt sensitivity as energy-driven inflation pushes interest rates higher, breaking the ability of SMEs to handle existing debts.

Given the immediacy of the financial challenge, Bartels urged organisations to build strategies now, not wait until the next BAS cycle.

“Businesses that identify rising costs early and adjust their strategy will have far more options available – from restructuring debt and renegotiating supplier agreements to improving operational efficiency and cash flow management,” he said.

“Waiting until the numbers appear in quarterly reporting can narrow those options quickly. In an environment where fuel costs and supply chain expenses can jump within weeks, directors who act early will be far better positioned to protect their businesses.”

Are Australians stressed? Very much so

Meanwhile, a survey by the strategic advisory firm Nature, conducted over the weekend, found 97 per cent of Australians are concerned about fuel supplies in the context of the global political landscape, with only seven per cent of those surveyed believing Australia is well prepared for fuel supply disruptions.

More than 52 per cent of survey participants said they had reduced unnecessary driving and 28 per cent were considering, or had already begun, storing petrol at their home.

“A staggering 97 per cent are concerned about the reliability of Australia’s fuel supplies, including one in three who say they are ‘extremely concerned’,” Nature managing partner Chris Crook said.

“The majority (80 per cent) of those surveyed don’t expect an end to the instability in the near future, saying they expect there will be significant fuel shortages in Australia for the next few months,” he added.

“We know that Australians were already feeling fatigued and anxious about cost-of-living issues before the latest geopolitical tensions in the Middle East emerged, and this new research suggests concerns about fuel security are now adding to an already strained national mood.”