Small business yet to see signs of recovery

Small businesses expect sales and profits will remain at historic lows in the next three months as the recession continues to rip through the sector, according to a new survey from the Australian Chamber of Commerce and Industry.

The survey of 2821 businesses found that the index for general business conditions slipped to 33.1 points in the March quarter, the lowest point since the survey began in 1996 and 39% down over the last 12 months.

The indices for revenue, profit and export sales also slipped during the quarter and are all expected to remain depressed in the three months to the end of June. Investment in buildings and structures and investment in plant and equipment is also down sharply.

While wage growth and non-wage labour costs have fallen, the index measuring employment is down 30% since March 2008 and is expected to fall further in the June quarter.

Perhaps most worrying is the index measuring expected economic performance, which has fallen from 39.2 to 24.7 over the last 12 months, indicating small businesses are bunkering down for a tough year ahead.

Greg Evans, director of industry policy and economics at ACCI, says: “Unfortunately small business remains pessimistic about a quick turnaround in business conditions.”

While he welcomed the Government’s budget announcement that the small business investment tax rebate would be increased from 30% to 50%, he called on the RBA to drop interest rates further in order to get the SME sector moving again.

“The RBA may have been too cautious to date in lowering rates,” Evans says. “The ‘green shoots’ of recovery are not yet evident across the small business landscape and thus further reductions in business lending rates would be of considerable assistance in rebuilding confidence.”

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