Australia's economic climate may have levelled off, with the first encouraging signs emerging from the small business sector, according to the Sensis Business Index released yesterday.
Australia's economic climate may have levelled off, with the first encouraging signs emerging from the small business sector, according to the Sensis Business Index released yesterday. The survey provides the latest snapshot of small and medium enterprise (up to 199 employees) activity in Australia, with 1,800 businesses from metropolitan and regional areas interviewed between February 2-24 this year.
Western Australia recorded the strongest rise in business confidence among SMEs this quarter of any state or territory and the second highest level of confidence overall.
SMEs in WA recorded the highest net perceptions of the future state of the Australian economy of any state or territory while also recording decreased performance across all indicators in the past quarter with the exception of profitability, which improved but remained net negative.
Along with Queensland and the Northern Territory, Western Australian SMEs are the most likely to expect to increase employment in the coming quarter, the report found.
While support for the Western Australian government fell during the past quarter it was the second-most supported government by SMEs and one of only two governments to achieve a net positive result this quarter.
The report's author, Christena Singh, said Australia's economic landscape was showing some signs of stabilisation after 12 months of rapidly declining conditions.
She said trading conditions and business confidence remained at record lows for Australia's small businesses, however, the nation was seeing the first signs that the economy may have stemmed the massive slide experienced over the past 12 months.
"During the last three months, we have seen the percentage of businesses affected by the economic downturn remain fairly much constant. Most key performance indicators have either declined marginally or remained unchanged, while business confidence has weakened only slightly," Ms Singh said.
The business confidence indicator has fallen one percentage point over the quarter to 12 per cent, after halving the quarter before.
Overall, 33 per cent of small businesses are worried about their business prospects while 45 per cent are confident.
Weak consumer demand is the main reason businesses are not confident.
The Sensis Business Index also shows demand for goods and services has fallen marginally during the quarter, with the indicator down one percentage point to reach the lowest level on record.
Ms Singh noted that while weak demand was a key issue for small businesses, only three in ten businesses said they had a dedicated sales force.
Profitability is unchanged from last quarter, equalling the record lows experienced by small businesses in November 2000.
Employment has continued to fall over the last three months. More small businesses have decreased staff numbers than increased, resulting in a contraction in the workforce of six per cent. On the up side, small businesses are anticipating increased hiring in the short term.
"Small business capital expenditure figures are welcome news for the Australian economy, rising marginally from last quarter's low. Added to this, more businesses are expecting to increase capital expenditure in the short term.
"It is encouraging to see small businesses are responding to the economic downturn by not only reducing costs, but also by advertising more to widen their potential market reach and to try and grow their business despite the difficult trading conditions."
Small business support for the federal government has risen strongly during this quarter on the back of its economic stimulus activities.
The approval rating indicator has risen 11 percentage points to negative two per cent, showing 21 per cent believe the government's policies support small business while 23 per cent believe they work against.
Ms Singh concluded that while the most recent data suggested conditions had stabilised, there were still significant risks for the Australian economy.
"Small businesses are continuing to experience falling demand and believe the Australian economy will deteriorate further in the near term.
"This coming quarter will be a defining time for many small businesses."