After showing slight signs of recovery over the past two months, SME sentiment has declined anew, as reflected in the latest SME Sentiment Tracker data.
The research conducted by business market research firm Fifth Quadrant in partnership with Ovation revealed that only 10 per cent of SMEs expect the Australian economy to improve over the next three months, while 53 per cent anticipate weaker conditions.
In contrast, sentiment regarding global economic conditions continues to strengthen, driven by declining interest rates in many countries.
Consequently, support for the Australian government declined as well in the October data, with only 30 per cent of respondents expressing satisfaction with government policy.
All key financial indicators weakened as well, with 37 per cent of SMEs reporting lower revenues compared to 12 months ago, and 22 per cent reporting a financial loss in October. Additionally, 23 per cent of SMEs have faced significant financial challenges over the past year, with increased competition (58 per cent) and poor strategic decisions (36 per cent) emerging as more prominent drivers of these difficulties.
Because of these factors, 11 per cent of SMEs expect to struggle with loan repayments over the next six months, an increase from 8 per cent recorded in August.
Furthermore, growth expectations for the next 12 months have dipped, with only 32 per cent of SMEs focusing on expansion, compared to 35 per cent that was recorded the previous month. Consequently, capital investment and marketing spend intentions for the next three months have also declined.
With regards to hiring, 16 per cent of SMEs are hiring for new or existing roles, a figure significantly lower than 12 months ago but consistent with the 17 per cent reported last month.
Fifth Quadrant, Managing Director, James Organ commented, “SME sentiment has weakened once again, with declining confidence in the Australian economy. Key financial indicators, including weaker revenues, rising financial losses, and increasing loan stress, have negatively impacted growth expectations, capital investment, and hiring intentions. In this environment, SMEs are likely to remain highly cautious as we move through the holiday period.”
