Poor consumer sentiment, steady interest rates and the high Australian dollar have all contributed to stagnating business growth and sapped the confidence of small and medium-sized enterprises (SME) in Western Australia, surveys have shown.
The latest quarterly Sensis Business Index found that a third of the 225 SMEs surveyed in WA said they were worried about their prospects for the next 12 months.
The report’s author, Christena Singh, said small businesses were primarily concerned with how little consumers were spending.
“Trading conditions have been weak for Western Australian small businesses during the quarter, with sales substantially down, profitability stagnant, but prices rising,” Ms Singh said.
WA SMEs were expecting another weak quarter but sentiment remained slightly higher than the national average.
The report showed that 16 per cent of WA small businesses were planning to close or sell their operations, which was almost the same as the national average of 17 per cent.
In a bid to grow their businesses, 41 per cent of WA SMEs were planning to introduce new products this financial year and 37 per cent were planning to increase their online presence.
Other findings of the report showed that profitability was stagnant and overall employment in WA businesses had contracted further.
Bankwest’s latest survey of 156 small businesses across WA reported similar findings.
The Bankwest Business Challenges Survey found that 72 per cent of SMEs were finding this year tougher than last, with 64 per cent citing the economic environment as the biggest challenge.
Bankwest business chief executive Ian Corfield said he had observed a shift in the concerns of SMEs across WA.
“No longer are small businesses as preoccupied with their day-to-day financial issues but instead their attention is shifting to macro-economic matters like the state of the economy, the current exchange rate and the impact from the mining sector,” Mr Corfield said.
Almost a third of the WA businesses surveyed said the strength of the Australian dollar was a challenge for their business.
“The strength of the Australian dollar is encouraging consumers to spend their money offshore and the pressures from the current cost of living are making consumers cautious which is having a direct impact on local businesses,” Mr Corfield said.
Compared to a year ago, businesses were also finding it tougher to retain employees and attract more new talent.
Mr Corfield said these difficulties related directly to the tightening of the labour market and the pressures from the mining sector flowing through to the rest of the economy.
According to the survey, 26 per cent of SMEs saw developments in technology as an opportunity for their business, with almost 70 per cent already having an online presence and 42 per cent having increased their online presence over the past 12 months.
The Survey of Business Expectations commissioned by the Commonwealth Bank and the Chamber of Commerce and Industry of Western Australia, found business confidence among WA SMEs had fallen to the lowest level since the global financial crisis.
In the September quarter, only one in four WA businesses expected the economy to improve over the next 12 months.
The survey also found that 42 per cent of businesses reported their bottom lines were shrinking and only a third expected to increase their workforce over the next 12 months.
At a national level, global information provider Dun & Bradstreet’s latest Business Expectations Survey found that interest rates were having the biggest impact on SMEs.
The Reserve Bank of Australia has kept interest rates on hold this month, leaving the cash rate at 4.75 per cent.
Dunn & Bradstreet chief executive Christine Christian said the findings were consistent with a decline in business credit activity recorded by the Reserve Bank.
“We are beginning to see companies, particularly in manufacturing and retail, increasingly behaving like businesses in recession,” Ms Christian said. “The rising vulnerability to an interest rate rise is a warning sign these firms are deeply uncertain about the future.”
The survey found that sales expectations for the December quarter were at their lowest in two years, employment expectations remained negative and significant staff reductions were expected to come from the manufacturing and retail sectors.
