Despite high inflation and reduced consumer purchasing power that is still adversely affecting the Australian economy, many SMEs remain optimistic about their short-term growth prospects.
The latest SME Growth Index, conducted by non-bank SME lender ScotPac, reveals that 53 per cent of SMEs are projecting revenue growth to September 2024. Although this figure is down from 57 per cent for the same month last year, it is a significant improvement on the 32 per cent recorded in the previous edition of the Index.
The Index also highlights the fact that the average predicted growth rate of 8.8 per cent is the highest ever recorded in the decade-long history of the report, surpassing the previous high of 8.6 per cent recorded in the very first edition in 2014.
However, the report also notes some clear signs of strain, with the gap between high and low SME growth projections ballooning to 38 percentage points, and the average rate of predicted revenue contraction reaching a new high of -10 per cent.
Notably, the research also reveals a regional disparity in terms of SMEs’ optimism:
- Western Australian and Queensland are the most positive regions, with 89 per cent and 81 per cent of SMEs in those states respectively forecasting six-month revenue growth.
- Victorian SMEs are the most pessimistic, with only 14 per cent of those in the southern state projecting revenue growth while 65 per cent are predicting a decline in fortunes.
- NSW SMEs are occupying the “cautious middle ground” with 43 per cent predicting revenue growth, 27 per cent fearing a decline in revenue decline, and 30 per cent anticipating no change.
ScotPac CEO, Jon Sutton said that the growing chasm in SME revenue projections confirms that Australia’s post-COVID, two-speed economy is “alive and well”.
“The fact that most SMEs remain optimistic in a challenging economic climate is a great indicator of the agility of Australian business owners who continue to adapt and thrive,” Sutton said. “A lot of businesses we work with are investing in new equipment or technology in fast-growing sectors like health and aged care, e-commerce and renewable energy.
“However, other sectors like construction, restaurants and cafes and shopfront retail face ongoing challenges with issues including material costs, supply chain disruptions and cost of living rises that are squeezing discretionary spending,” Sutton added. “Whatever the situation, SMEs should talk to their brokers and advisers regularly about the growing range of working capital options available to support their specific needs, however simple or complex.”
