The latest edition of the SME Sentiment Tracker by business market research firm Fifth Quadrant in partnership with Ovation reveals an overwhelmingly positive sentiment among SMEs towards both domestic and international economic conditions.
The report highlights the fact that only 37 per cent of SMEs expect domestic economic conditions to weaken in the next three months, compared to 69 per cent in February 2023. This optimism is mirrored in growth expectations, with 44 per cent of businesses focusing on growth over the next 12 months, marking the highest level of optimism since the research commenced.
The report also noted that as inflation continues to moderate, concerns about interest rates have sharply decreased, contributing to a more stable and predictable economic environment for businesses and consumers alike.
February’s financial indicators also highlighted a continued positive trajectory that began in mid-2023, with the year-on-year revenue metric improving to -2 (compared to -21 per cent in August). This steady recovery is further evidenced by the significant rise in SME profitability, with 51 per cent of SMEs reporting profits, surpassing figures from the corresponding periods in 2022 (39 per cent) and 2023 (43 per cent).
There was also a substantial rebound recorded last month in short-term revenue expectations, with a net score of 25 per cent (compared to 0 per cent) last month. The employment outlook also remains positive, with 17 per cent of businesses expecting to increase staff numbers over the next three months.
Demand for additional finance over the next three months has decreased slightly to 14 per cent in February, following a spike in December. However, the report noted that a significant proportion of this finance is aimed at supporting growth initiatives and facilitating the acquisition of equipment, machinery, or plant.
The report also noted that satisfaction with the Federal Labor Government has reached its highest level in the last 12 months, following the announcement of lower inflation in early 2024 and the overhaul of Stage 3 tax cuts.
“The SME landscape is marked by a wave of optimism, underpinned by significant improvements in economic sentiment and financial performance,” Fifth Quadrant Managing Director, James Organ, commented. “The shift to a predominantly positive outlook reflects easing inflationary pressures, enhanced revenue prospects, and a strong focus on growth and investment. Despite the backdrop of potential economic challenges, SMEs signal a promising year ahead.”
