The latest SME Sentiment Tracker by business market research firm Fifth Quadrant in partnership with Ovation highlights a more optimistic outlook on economic conditions both globally and in Australia.
The index attributes this sense of optimism about the slowdown in the annual inflation rate to 4.1 per cent, which has helped ease concerns about escalating costs and interest rates.
While 40 per cent of SMEs recognise that the economic outlook and cost pressures will pose a major challenge in 2024, concerns regarding energy prices (72 per cent), fuel (75 per cent), and the cost of credit (71 per cent) have decreased to their lowest levels in the past 12 months.
And, while 25 per cent of SMEs are streamlining their business operations, the job market overall remains dynamic with 17 per cent of SMEs planning to expand their workforce in the next three months and 27 per cent actively seeking to fill vacancies.
Furthermore, finding qualified talent is becoming less challenging, as only 21 per cent of SMEs in the process of hiring report significant difficulties in recruitment. This percentage is the lowest observed in the past 12 months, with skilled candidates now more accessible.
With 37 per cent of SMEs forecasting revenue growth in 2024, the index noted an uptick in their investment intentions, particularly in areas like plant and equipment (26 per cent), light commercial vehicles (18 per cent), and agricultural, construction, and earthmoving equipment (13 per cent). This trend underscores a growing confidence among SMEs to make investments now that inflation appears to be under control.
Despite the fall in inflation though, there has been a notable decline in satisfaction levels with the Federal Government over the past month. This downturn in sentiment appears to be largely influenced by recent amendments to the stage three tax cuts. Interestingly, the government seems to be receiving little recognition or credit for the role it may have played in reducing inflation.
“Despite the backdrop of geopolitical tensions, new supply chain challenges and ongoing economic issues the sentiment amongst SMEs continues to trend higher now that inflation and interest rate pressures appear to be under control,” Fifth Quadrant, Managing Director, James Organ commented. “Accordingly, investment intentions are growing with many SMEs increasing their capex, marketing and team numbers over the next three months.”
