Home Industry Market SMEs cautiously optimistic on economy, but worried about lack of work, sales

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Australia’s small to medium business operators are becoming cautiously optimistic about a stronger economy emerging in one year from now, backed by an improvement in sales and their business profitability. 

But, while signs of optimism are emerging amongst SMEs across Australia, they, nevertheless, temper their confidence with increasing concerns about a potential lack of work or sales, along with reservations about the current economic climate.

The views of around 1,800 SMEs have been revealed in the quarterly Sensis Business Index survey, which, in fact, recorded the strongest result in two years for businesses reporting increased sales during the past quarter.

SMEs also flagged improved profitability during the quarter, although profitability remained a net negative overall, as it has been for more than four years.

According to the Sensis Index, the improvement in SME confidence reverses some of the larger downturn recorded the previous quarter, and report author, Christena Singh, said that while there were early signs of improvement in ‘recovery’ indicators such as sales growth and profitability, there remained some uncertainty amongst SMEs about the immediate future.

“There is clearly increasing confidence surrounding the longer term outlook, but it should be pointed out that certain concerns remain about shorter-term business conditions,” she said.

The index revealed that concerns around lack of work or sales rose two percentage points during the last quarter to 27 per cent, which Singh said was the highest level in the history of the Sensis Business Index, which commenced in 1993.

The survey also revealed that increased costs continue to challenge small business, with three quarters of SMEs that paid for utilities reporting higher utilities costs over the past year, while other areas where SMEs reported high cost increases over the past year were insurance, raw materials, stock and wages.

On a State and Territory basis, the survey shows that the highest level of business confidence was recorded in the Northern Territory with a nine percentage point rise on last quarter. Confidence also rose in New South Wales, Victoria and South Australia, with Victoria recording the largest improvement in confidence.

Conversely, Queensland recorded the lowest level of business confidence at 12 per cent net balance, while confidence also fell in Western Australia, Tasmania and the ACT.

In a major turnaround from last quarter, the Australian Capital Territory recorded the largest decrease in confidence of all the states and territories, falling 31 per cent to levels experienced six months ago.

Singh said that while small business continued to report tough conditions over the past quarter, the expectations on key indicators for the next 12 months were more encouraging.

“Fifty-two per cent of SMEs believe sales will rise in the next year, taking expectations about the value of sales to their highest level in more than a year.

“Profitability expectations also rose six percentage points to a net positive balance of 31 percent.”

Despite this, Singh said expectations for the next (current) quarter remain muted with sales expectations down 10 percentage points from the previous quarter, profitability expectations down three percentage points, wages and prices charged also expected to fall in the short term, and capital expenditure and employment expected to remain flat.

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Peter Dinham

 

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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