Business confidence surges to highest level in 6 ½ years

Small and medium business (SMB) confidence is now sitting at its highest level since March 2010, following an eight-point rise to +46 on a net basis, according to the latest Sensis Business Index (SBI) survey.
Sensis chief executive officer John Allan said: “Businesses closed out 2016 on a high, with confidence up seven points for the year and expectations that 2017 will be even stronger. While business owners again felt optimistic about their own specific business strengths, it was the improvement in the perceptions of the economy which really drove confidence higher this quarter.”
The Index, which reflects the views of 1,000 small and medium businesses from across Australia, revealed that more than four times as many SMB (61%) are now feeling confident as those who are worried (15%).
There were confidence gains everywhere except for Tasmania – down 14 points to +38. NSW is again the most confident location on +54, while the Northern Territory is again on the bottom, despite a seven-point rise to +16.
“The national improvement in confidence was primarily driven by businesses in the east coast states. The story in Western Australia and the Northern Territory was very different with businesses there still adjusting to the conditions in the resource sector, although the situation has improved somewhat this quarter,” said Mr Allan.
Perceptions of the current state of the economy have moved into positive territory, jumping 11 points to +3, which is the best result since December 2013.
“Just as the stock markets shrugged off global uncertainty to finish 2016 on a high, it was also the case for Australia’s small and medium businesses. Perceptions of the economy are now in positive territory for both the short- and long-term projections and this points to a strong year ahead,” said Mr Allan.
The Federal Government’s approval rating did not move this quarter, remaining on +2, although it finished the year down five points compared to the same period in 2015.
“The number of businesses worried about excessive bureaucracy and red tape was up this survey and these are the key issues the Government needs to address if it is to win over more business owners this year,” said Mr Allan.
Confidence in the policies of state and territory governments was the same or better everywhere except for the ACT. Despite this only, the Tasmanian, NT and NSW Governments have a positive rating, with the Queensland and South Australian Governments still lagging well behind.
At an industry level, the biggest improvement was in Finance and Insurance, up 31 points and now leading the other sectors thanks to strong sales results. The biggest concern was in Retail Trade, down 23 points due to poor sales, and cost and competitive pressures.
In the last survey of each year the Index also looks at expectations for the year ahead. Businesses expect all of the key indicators – sales, employment, wages, prices and profitability – to remain positive, with strong results anticipated for sales and profitability in particular.
“The capital expenditure result was up nine points this year and now sits in positive territory, with businesses also reporting easier access to finance this quarter. These conditions should help foster growth in jobs and the economy in 2017,” said Mr Allan.
“The lower Australian dollar also appears to have had a positive impact on exports in 2016, with the number of businesses exporting goods or services rising four points to 15 percent.”
Confidence among SMB in the capital cities rose 14 points to +49, while regional confidence fell two points to +41. The 16-point reversal means metropolitan SMB are now more confident.
“Businesses in Sydney, Melbourne and Perth overtook their regional counterparts this quarter and are now more confident. Nationally, business owners in metropolitan areas are more optimistic about the economy, which is the key factor making them more confident than their regional counterparts,” said Mr Allan.
Small and medium businesses comprise 99 per cent of all businesses operating in Australia.