Small business dreaming of rate cuts

For SME owners hoping for a further interest rate cut this year, it appears their dreams of an early Christmas present may be dashed. With the official interest rate already at an all-time low, and two consecutive hold decisions in October and November, most economists are betting on the Reserve Bank of Australia (RBA) keeping interest rates at 1.5 per cent in December.

Research from mid-tier accounting and advisory firm Bentleys  shows SMEs would see a further cut as a positive, with the fifth The Voice of Australian Business Survey 2016, a national survey of SMEs across all industries and regions, revealing 30 per cent of SMEs view interest rate cuts as the domestic event most likely to positively impact their business.*

Phil Rix, Managing Director of Bentleys Perth, encouraged SME owners who have been dreaming of a further cut to focus on what they can control within their business as 2016 comes to a close.

“It’s that time of year when businesses start to prepare for the year ahead. While almost a third of SMEs were hoping to see another interest rate cut to help spur business growth in the face of other domestic economic challenges, the impact to date of cuts has been minor and marginal. For this reason, we encourage business owners to focus instead on the things within their control and that will help them to attract new customers, grow sales and improve profits. This may include looking at their marketing strategy, assessing their business plans and even improving their systems and processes to save them time and money.”

The survey reveals interest rate cuts beat all other desires for SMEs. Interestingly, 25 per cent of SME owners saw the re-prioritisation of the small business portfolio by the Federal Government (removing it from cabinet) as having a positive impact on their businesses, compared to 14 per cent who saw it as a negative.

The falling Australian dollar was the domestic event most commonly cited as having a negative impact on businesses (29 per cent) while just under a quarter of respondents (24 per cent) said that the threat of Australia’s AAA credit rating being downgraded as having a potentially negative effect on their businesses.

“With a falling Australian dollar, SME owners may suffer due to the knock-on effect with spending, as it significantly lowers the purchasing power for both themselves and their customer base.”

“As we head into Christmas season, for example, businesses should take stock and review how business is going – ask yourself if you can better manage cashflow; set up a budget; review your debtors and your suppliers. The results could be just as positive as another interest rate cut – and they will be a lot more certain,” Rix said.

Key findings include:

  • 30 per cent of SME owners saw interest rate cuts as the domestic event most likely to positively impact on their business
  • 25 per cent of SME owners saw the re-prioritisation of the small business portfolio by the Federal Government as having a positive impact on their business
  • 29 per cent of SME owners believe the falling Australian dollar would have the most negative impact on businesses
  • 24 per cent of SME owners see the threat of Australia’s AAA credit rating being downgraded as having a potentially negative effect on their businesses

* Conducted by Empirica Research in September 2016, it surveyed 314 SMEs across all industries and regions

Inside Small Business

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