Happy days ahead: economy best in four years and holding

A quarter (25%) of all Australian small and medium businesses (SMB) believe the economy is growing versus 16% who say it is slowing, resulting in the best net balance score (+9) since December 2013, according to the latest Sensis Business Index (SBI) survey.
It is the fourth quarter in a row where a positive net balance score has been recorded on this measure, while there was also a seven point increase in expectations of the economy in 12 months’ time to +16 – another four year high.
Sensis CEO John Allan said: “Small and medium businesses see strength in the economy, and this is revealed in their assessment of each of the key indicators, all of which – prices, sales, profitability, employment and wages – saw a rise in the net balance score both for last quarter and in expectations for the quarter ahead.
“For the majority of businesses, growth is driving further employment and the employment net balance has improved to its best result in more than five years.”
The Index reflects the views of 1,000 small and medium businesses from across Australia. It has also revealed that the business confidence score jumped seven points to sit at the equal highest level since March 2010. The net balance of +46 is calculated by comparing the number of confident SMB (61%) to those who are worried (15%).
Access to finance improved, with the good news it has become easier for many SMB to secure loans. Of the 12% of SMB who applied for finance, more than two thirds were successful.
“With the ability to access finance, a SMB owner can think about capital expenditure to grow their business, which in turn can drive more sales and flow on to requiring more employees, and so on,” said Mr Allan.
“While there is much about which SMB feel optimistic, there are still challenges and 12% say that a lack of work or sales is a key concern, whilst 8% are frustrated at the inability to find or keep staff.
“A number of state and territory governments are addressing this, rolling out training schemes to help build skills and capabilities useful to SMB. Many of the unprompted comments coming from SMB who believe their government’s policies are supportive cite the training programs that have been implemented as evidence.”
Across the nation, each state and territory saw a rise in business confidence, except WA where the score remained the same as last quarter. Looking more closely at the result, there was a 24 point reversal of confidence between metropolitan and regional SMB (+50 vs +39), with the cities leading the boost in confidence.
“Brisbane is the most confident city in Australia among SMB followed by the ACT, while regional NSW is more confident than Sydney – albeit dropping 19 points to a reduced difference of six points,” said Mr Allan.
“Unlike their metropolitan counterparts, regional SMB do not see the economy now or in 12 months as being strong. Nevertheless, in both locations positive expectations are indicated for this quarter on all five key performance indicators.”
All sectors continue to have a positive net balance with half of the industries improving this quarter. The Hospitality sector’s business confidence score almost tripled from last quarter from +21 to +62, while the Transport and Storage sector enjoyed a 26 point rise. Conversely, Retail Trade languishes at the bottom on +16, dropping one point.
Businesses saying Federal Government policies are supportive fell (22% to 18%), while those saying policies work against small business also fell (16% to 15%). As a result, the net balance was down three points to +3.
“SMB unimpressed with the Federal Government’s policies cited too much bureaucracy, too much of a focus on ‘big business’ and high taxation. Of those with a favourable assessment, the Federal Government was seen as supportive and interested in small businesses, making efforts to reduce tax, and offering tax incentives,” said Mr Allan.
At a state and territory government level, the Tasmanian Government returned to top spot with a seven point rise to a net balance of +16. Positive perceptions of the ACT Government dropped 12 points to +3, albeit it remains the second most popular government among SMB. The SA Government saw the biggest improvement with an 11 point rise, however, it remains the most unpopular of all the state and territory governments on -26.
“The employment and training schemes being offered to SMB were a key reason for the more positive disposition towards the Tasmanian and South Australian Governments this quarter,” said Mr Allan.
“As we head into the crucial Christmas period – especially for the Hospitality; Cultural, Recreational and Personal Services; and Retail sectors – business conditions are strong, hopefully ensuring a high level of confidence is maintained.”