WA SME confidence bucks national trend

Business confidence in Western Australia has defied a plunging national trend, a new report on Australian's small and medium-sized enterprises market has found.

The joint JPMorgan and Fujitsu 2008 report revealed that SME confidence in WA had risen 3 per cent, while the country's other boom state Queensland recorded a 2 per cent lift.

In comparison, business confidence in New South Wales fell 18 per cent, Victoria dropped 16 per cent while Tasmania recorded an 8 per cent fall.

The report revealed that a combination of interest rate rises, the global credit crunch and low consumer confidence could result in an increase in unemployment.

JPMorgan banking analyst Brian Johnson said SME lending accounted for 24 per cent of the total business lending portfolio.

"With the latest data for the 12 months to May 2008 indicating that total business lending is slowing significantly, we anticipate a corresponding slowdown in SME credit growth," he said.

Mr Johnson said the potential burden faced by SMEs was exacerbated by the relatively benign interest rate period between 2002 and 2007, during which time about 70 per cent of borrowers were paying interest rates of less than eight per cent.

Fujitsu general manager Martin North said the gloomy outlook projected by the report was matched by this week's Bank for International Settlements' (BIS) report.

"This means the current depressed state of the financial services sector is tipped to spill out into the real economy and the SME sector is the bellwether of this as the report has highlighted," Mr North said.