BUSINESS confidence in the New England and North West has continued to drop as the drought drags on, according to a survey by the NSW Business Chamber.
NSW Business Chamber regional manager Joe Townsend said the news wouldn't come as a shock to anyone in the local business community.
"It's no surprise that the New England and North West areas recorded the lowest results as they are dealing with the crippling drought and the impacts that it is having on the entire supply chain," Mr Townsend said.
"With more local businesses identifying a decrease in sales revenue, the recent tax offsets for low and middle income earners should provide a welcome boost for retailers in the lead up to Christmas."
The survey also reveals a growing skills shortage.
When the last survey was conducted mid-year, 68.5 per cent of businesses in the region said they had suitably skilled staff.
That figure was halved in the recent survey to just 34.8 per cent.
Mr Townsend said the skill shortage was just one of many obstacles facing local businesses.
"Energy costs also remain a concern for many businesses with elevated electricity and gas bills continuing to squeeze margins and reduce the capacity to invest in capital and other resources that would assist in increasing productivity and output," Mr Townsend said.
"Like the rest of Australia, NSW's growth potential is hampered by relative weak household demand. Our survey shows industries such as construction, retail and food services are among the weakest.
"Record low interest rates, a more competitive exchange rate and income tax cuts may eventually boost growth, however business conditions remain subdued and are clearly being affected by the drought and concerns with respect to international trade."
Mr Townsend said all levels of government had to recognise the plight and challenges of drought-affected areas of regional NSW.
"NSW is an economy that depends on small business so we need to heed the warnings from those on the frontline," Mr Townsend said.
"We need measures and initiatives to address immediate water requirements, but also investment in measures that ensure greater water security and economic sustainability for the future."