The latest edition of the SME Sentiment Tracker prepared by business market research firm Fifth Quadrant (formerly ACA Research) in partnership with Ovation has found that overall SME sentiment has been positive in the last month.
In particular, 37 per cent of SME decision-makers reported a good performance in the 2023 financial year, compared to only 17 per cent indicating it was a poor year. In addition, 34 per cent of SMEs are planning expansion in the next 12 months.
However, the report noted some significant roadblocks, with 34 per cent of SMEs reporting lower revenue than 12 months ago. Profitability has dropped to 46 per cent in June from 59 per cent in April. Furthermore, only 21 per cent anticipate revenue growth over the next four weeks, a significant decline from 32 per cent in March.
The state of the economy is still an issue, with 87 per cent of SMEs concerned about rising interest rates, 83 per cent worried about energy costs and 67 per cent expecting the Australian economy to weaken in the next three months.
The report also noted that 40 per cent of SMEs are not well positioned to withstand a recession and only 19 per cent are actively recruiting. Of these SMEs, 62 per cent are struggling to find skilled applicants with suitable wage expectations.
Given these challenges, the report highlights an increased demand for additional working capital. However, investment in capital equipment and marketing are both expected to decline.
Accordingly, satisfaction with the federal Labor government’s ability to support business needs has declined to 27 per cent overall, with particularly low levels of support in Victoria, where it stands at 18 per cent.
“In summary, the June data paints a challenging picture,” Fifth Quadrant’s Managing Director, James Organ, said. “The increase in interest rates continues to dampen demand and the cost of doing business continues to rise, making it very difficult for SMEs to remain profitable. Accordingly, sentiment remains weak and recruitment activity soft. These indicators highlight the tough economic environment SMEs are navigating.”
