SME business conditions hit 18-month high, NAB survey reveals

Small business conditions have surged to an 18-month high, with profit outlooks at their best in a year due to surging consumer confidence, the latest results of the NAB SME quarterly survey reveals.

The survey comes after a string of positive economic data, including a 20% increase in the ANZ jobs series yesterday and a slight increase in consumer confidence today according to Westpac.

The survey found SMEs with an annual turnover of between $2-3 million recorded the biggest improvements in the December quarter, with that index jumping 13 points to 17. Businesses with turnover between $5-10 million rose by six to 14, while those with turnover between $3-5 million increased by five points to eight.

Overall, the business conditions index for SMEs grew from five points last year to 13, while the profitability outlook index surged from 27 points to 35.

NAB Business executive general manager Geoff Greer said in a statement the result was due to surging consumer confidence, which the survey recorded as jumping from negative 23 to a positive reading of 21 points from the June to December quarters.

“Seventy percent of all Australian workers are employed in small and medium-sized businesses – that’s nearly seven million Australians and their families who rely on this sector of our economy. So the more positive conditions we can see in the results of our latest survey are great news for the Australian economy.”

“What we are seeing here is that Australia’s small and medium-sized businesses are really starting to see the light at the end of the GFC tunnel,” he said.

Business confidence rose by one point to 16, while the transport and finance industries recorded the highest levels of confidence. All states recorded increases in business conditions, with South Australia recording the biggest increase of 24 points to 31.

Victoria rose by nine to 17, New South Wales by four to 12 and Western Australia by 13 points to three, into positive territory. Large improvements were recorded to manufacturing SMEs, with that index recording from negative one to 17.

But the survey also noted the most pressing issues for SMEs. The leading concern stated was future demand at 28%, cash flow management at 21%, access to qualified staff at 19% and rising interest rates at 11%.

Surprisingly, the survey found access to credit was listed as the main concern for only 10% of SMEs, while taxation and legislative issues were cited by 8% as the most concerning issues.

“Whilst still a concern, it’s pleasing to see that ‘access to credit’ is not ranking at the top of the list, which indicates that more banks are coming back to the market to support small businesses,” Greer said.

“Access to qualified staff is an issue in states like WA where there is a booming mining and
resources sector driving demand for the trades and other highly skilled resources,” he said.

Looking forward, SMEs expect improved profits within the next year, with the annual profitability outlook index rising eight point to 35 – the best reading since June 2007. The survey found upper SMEs were the most optimistic, followed by lower SMEs.

Mid-level SMEs were the least optimistic, with the finance and property sectors expecting the best improvements in profits.