While the Federal Budget is always important for small business, the situation this year looks to be even more critical.
The Federal Budget looms large for SME sentiment. While Budgets are always important for small business, the situation this year looks to be even more critical.
Given the relatively recent leadership change, the prospect of a general election some time in 2016 and speculation around potential policy changes, particularly around taxation, according to Westpac Senior Economist, Matthew Hassan.
With the mining downturn continuing to weigh heavily on some parts of the economy, the housing market slowing and consumer demand looking uneven, we are likely to see a more unsettled backdrop for confidence over the next few months.
Westpac’s General Manager of SME, Julie Rynski said that the latest findings from the Westpac-Melbourne Institute SME Index, which provides information about the economic health of Australian small and medium sized enterprises, shows the burst of confidence we experienced last year following the Federal Government’s leadership change is tapering off.
Rising costs appear to be a key negative factor for SMEs’ with a net 48.5% reporting increased costs and a net 46% reporting rises in the price of goods and services.
Matthew Hassan believes some of the softness in confidence may be due to the time of year, with many sectors coming off seasonal highs over the Christmas holiday period.
When asked about conditions now versus the same time a year ago, a clear majority of SMEs reported improvements in real business activity – a net balance of +10%, sales – +18%, hours worked – around +27%, and investment – around +22%. Matthew said that rising costs are impacting bottom lines, with the number of businesses reporting an increase in profits over the last year only just larger than those reporting declines – net balance of +1.5%.
The improved trading performance compared to last year may account for SMEs’ more upbeat expectations which has come despite a very rocky start to the year for global financial markets, he added.
The survey reveals that, despite a pessimistic assessment of current business conditions – the Index is 88.6, which is below the neutral mark of 100 – SMEs across Australia are positive about the future, with the Future Conditions Index sitting at 105.3 points.
The survey found a clear majority of SMEs with a website were seeing growth in online sales. Just under 60% of SMEs reported having an online presence – of these, about a third were reporting growth in online sales vs 10% reporting declines.
Julie Rynski said, ‘It’s good news to see such a high portion of SMEs realising the rewards of e-commerce platforms. We know that when SME’s thrive, the broader economy benefits so capitalising on e-commerce is key.’
