SME support for Federal Government falls as confidence in economy trends downwards

policy reforms, size, government business, Federal Budget

The November 2019 Sensis Business Index has revealed more than one in four (26 per cent) Australian SMEs think current Federal Government policies are working against them – an increase of 3 per cent from last quarter.

Sensis CEO, John Allan, said this is the first time the Index has seen an upward trend in the number of SME owners who believe Federal Government policies are working against them.

“Over the years we have seen a growing perception among SMEs that Federal Government policies do not affect them. This change in sentiment may be small but is a significant trend,” he said.

The sentiment comes as SME confidence in the Australian economy drops five per cent quarter on quarter, with 39 per cent of SME owners now believing the economy is in slowdown compared to 34 per cent in the last period. Compared to the previous quarter, fewer SME owners now believe the economy is growing (three per cent drop to 13 per cent). 36 per cent of SMEs also believe the nation’s economy will be worse in 12 months’ time, compared to 30 per cent last quarter. Only 16 per cent said it would be better a year from now, compared to 22 per cent last quarter.

This quarter’s results continue a clear downward trend in SME economic confidence since March 2018.

SME support for Federal Government

The national drop in support for Federal Government policies is led by South Australian (30 per cent), Tasmanian (29 per cent) and Victorian (28 per cent) SMEs.

Conversely, support from Queensland SMEs has seen the most positive change, growing 5 per cent from last quarter to 36 per cent. Positive sentiment across all other states held steady quarter on quarter except for Western Australia which dropped by 5 per cent.

At a state and territory level, the majority (37 per cent) of small businesses think their state government policies have no impact.

Allan said this showed that a significant proportion of small-business owners believe their state and territory government policies could be more effective.

“Whether this belief is right or wrong, the figures show a clear need for improvement in how state and territory governments are engaging with the small-business community and communicating their efforts to support local small-business owners through policy,” he said.

Access to finance increasingly difficult

SME owners also believe it has become harder to access finance, with 35 per cent saying it is now more difficult – a five per cent increase from the previous period.

Western Australian (42 per cent) and South Australian (41 per cent) SMEs are the most likely to say that finance is more difficult to access than six months ago.

Conversely, SME owners in Victoria (18 per cent) are most likely to think finance is now easier to access, with NSW coming second (14 per cent).

“Small businesses nationally are facing a worsening credit squeeze as banks continue to react to the intense scrutiny and criticism of the Royal Commission. Lenders are becoming increasingly risk averse and introducing more onerous checks on borrowers, which means SMEs are being unfairly caught in the fallout from disciplinary action on the banks,” Allan said.

Nationally, 17 per cent of SMEs tried to access finance in the past six months – a jump of five per cent compared to last quarter.

Of these, only 63 per cent were successful compared to 73 per cent in the previous period. More than one in four (26 per cent) were rejected, compared to a rejection rate of fewer than one in five (19 per cent) last quarter.

Bank loans remain the preferred finance option for small businesses nationally, holding steady at 39 per cent quarter on quarter. Interestingly, consideration of equity capital raising for finance saw a rise of three per cent from last quarter to 15 per cent.