The data from the latest edition of the SME Sentiment Tracker, prepared by business market research firm Fifth Quadrant, has revealed that SME revenues remained steady in the last month compared to December last year, aligning with the same period in 2024.
The report also found that SME optimism about the Australian economy has grown, supported by expectations of lower inflation and anticipated interest rate cuts, which are seen as key factors providing a clearer path for growth. As such, 39 per cent of businesses are prioritising growth over the next 12 months, which the report noted is the highest level since February 2024. Simultaneously, the proportion of SMEs planning to exit or downsize continues to decline, which is seen as a sign of greater business confidence.
The Hospitality sector has led this growth momentum, having benefited from strong holiday trading. On the other hand, the Retail and Production sectors continued to face challenges with weaker results.
Recruitment activity remains in the low as well, with only 11 per cent of SMEs actively hiring—the lowest level in the past 12 months and a significant decline from 27 per cent in January last year.
While satisfaction with the Federal Government has been improving, the report noted that overall sentiment remains negative. Futrthermore, SME leaders are found to have a generally hold a negative view of the Trump administration’s potential impact on the Australian economy, with female business owners and those in smaller SMEs less likely to anticipate positive outcomes.
Fifth Quadrant, Managing Director, James Organ commented, “Overall, SMEs are entering 2025 with cautious optimism, balancing growth ambitions with careful cost management and workforce planning, while remaining mindful of broader economic and political influences.”
