SME confidence hits highest level in almost five years

Business confidence has jumped to its highest level since March 2011, registering a net balance of +39, according to the latest Sensis Business Index (SBI) survey.

The survey shows more than three times as many businesses are now confident (57 per cent) as those who are worried (18 per cent), representing a 12 point rise in confidence among SMBs in the December quarter (+27 to +39), with confidence going up in every state and territory except the ACT.

John Allan, Sensis CEO, said: “Businesses told us that the key factors driving confidence are the specific strengths of their business, growing sales and being well established.”

The Index, which reflects the views of 1000 small and medium businesses from across Australia, also showed that confidence in the Federal Government has gone up six points (+1 to +7) in the first survey to be taken since Malcolm Turnbull took over as Prime Minister.

“The new Prime Minister has had a positive impact on overall perceptions of the Federal Government and there has also been a halo effect on confidence, with a number of businesses highlighting this as a reason for their views.

“However, the Government still has some work to do to regain the levels of support seen following the popular Federal Budget in May 2015,” Allan said.

States and territories breakdown

Across the states and territories, Tasmania was the shining star in terms of business confidence. It reversed a decline last quarter and is now comfortably the most confident State following a 46 point improvement (+18 to +64).

“All the states and territories posted a positive business confidence score and there was even a 15 point increase in South Australia, albeit it remains in last place. The ACT was the only location where we saw a decline this quarter following concerns around declining sales and the business environment,” said Allan.

Despite businesses feeling confident in their own business prospects, perceptions of the economy remain negative everywhere except for Tasmania. The net balance score did improve slightly this quarter from -19 to -17 but 86 per cent of businesses still either thinking the economy is slowing (31 per cent) or standing still (55 per cent).

While perceptions of the current state of the economy remain negative, there was a shift in the forward projections with an 11 point improvement in expectations for the economy in a year’s time (-4 to +7). This saw the net balance move into positive territory for the first time in 2015.

“Employment will be one of the key areas to watch this year, with 52 per cent of businesses now reporting barriers to taking on new staff. Of those, the number reporting a lack of work or sales as the primary concern has risen to 49 per cent,” said Allan.

“One of the concerns mentioned by SMBs was finding and keeping quality staff, with the primary problems being finding staff with the right skills as well as finding people who want to work.”

In terms of state and territory government support among SMBs there was a 15 point swing towards the ACT Government which has moved from negative to positive territory and now shares top spot with the Tasmanian Government. The NSW Government was the only other Government to post a positive net balance.

“The NT Government saw a further decline in support with complaints it is “all talk and no action”, as Darwin business confidence also moved into negative territory. Perceptions of the South Australian Government saw a modest improvement but it continues to struggle with SMBs who remain worried about high taxes and wasteful spending,” said Allan.

Regional growth

At a regional level, confidence rose 15 points in the capital cities (+29 to +44) and four points in regional areas (+25 to +29) with the gap between the two widening from four to 15 points.

In Victoria and Queensland there was a reversal in confidence levels, with Melbourne and Brisbane now more confident than regional areas in those states. The opposite was true in WA where regional businesses areas are now more confident than those in Perth.

Most industry sectors followed the national trend and saw improvements in confidence this quarter. However, there were small declines in communications, property and business services; transport and storage; and manufacturing.

The health and community services sector saw further gains to retain top spot, while the building and construction sector saw strong improvement to move from below the national average to become the second most confident sector.

“Poor sales and a difficult business environment drove confidence down in the manufacturing industry, which has now replaced wholesale trade as the least confident sector,” said Allan.

The Sensis Business Index uses a net balance score which is the difference between the percentage of businesses with a positive outlook versus the percentage with a negative outlook.

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