Sensis Business Index June 2018: SMB confidence is highest since the GFC

How confident do Australian business feel lately? Sensis has found out the answers, and we’re here to tell you about them.

Sensis, the Australian company behind such household brands as the Yellow Pages, WhereIs and True Local, make it their business to know a thing or two about how local industries are performing. To aid them in this goal, they have been conducting the Sensis Business Index survey every quarter since 1993.

The Sensis Business Index monitors the confidence and behaviour of small and medium businesses (SMB) around Australia in such diverse industries as manufacturing, communication, property, health, hospitality and retail among others. This gives an indication of the overall business health of the country and can indicate areas of growth and retraction for future quarters.

The quarterly Sensis Business Index has been tracking SME confidence and behaviour since 1993. It surveys 1,000 metropolitan and regional SMEs from areas such as manufacturing, wholesale and retail trade, hospitality, construction, communication, property, business services, health, community services, cultural and recreational industries.

The latest Sensis Business Index Results from June 2018 (Released 31 July 2018) have been published and the good news is that business is good. In fact, the overall confidence level in Australia is now at a higher point than it has been since the advent of the Global Financial Crisis in December 2009. For the quarter ending in June 2018, overall confidence was up seven points from the quarter previous, to a tremendous +49.

Breaking it down by regions around Australia, the latest survey results reveal that the Northern Territory has experienced the greatest comparative growth in business confidence. Earlier in the year, it was at +2, but the June 2018 results show that it is now increased by 26 points to +28. That sounds great but it still means that the Territory has the lowest rating of all the states and territories. Meanwhile, in New South Wales, the state also shows an impressive rise, going up 13 points to +56. In fact, the only state to record a drop-in figures is Victoria, going down one point to +48. Overall, the ACT remains the most confident region, with an overall rating of +61.

Interestingly, the traditionally large difference in small and midsize business outlook between metropolitan and regional Australia is narrowing. Now only at 10 points differences, the numbers may be decreasing as services and markets continue to expand out from the capital cities.

An interesting statistic recorded by the survey is that 29% of small or medium-sized businesses believe that the nation’s economy is improving, which dwarves the number who believe it is shrinking (15%).

Similarly, the outlook for the business landscape in 12 months’ time is strong. The net balance of outlook remains at an optimistic +12 points, which is one of the strongest results this survey question has seen in four years’ time.

The Federal Government received a generally favourable vote from survey takers, with the overall opinion of them staying steady at +3.

“Following the recent budget, tax stands out as a leading reason for Small and midsize businesses to have a favourable assessment of the Federal Government,” said Sensis CEO John Allan.

Allan continued that many SMB’s perceive the Federal Government as one that is trying to reduce tax and generally taking a position that is in favour of small business owners. Meanwhile, some are displeased with a focus on bureaucracy and favouring the top end of town.

Breaking it down by industry, the biggest rise in confidence in the most recently reported quarter comes from the Transport and Storage industry, rising 25 points to +46. Manufacturing recorded the only fall, dipping down to +34 from +55 in the previous quarter.

Key findings on SMB confidence

SMBs are feeling confident

There was a seven-point rise in SMB confidence last quarter generating a net balance of +49 (62% confident – 13% worried). This is the highest confidence level recorded since December 2009.

Confidence was higher in all locations but Victoria (down one point to +48). The biggest rise was in the Northern Territory (up 26 points to +28) followed by NSW (up 13 points to +56).

The ACT (up seven points to +61) remained the most confident state or territory while the Northern Territory continues to be the least confident, despite the significant improvement in its net balance.

The key influences on confidence were having specific business strengths and being an established, solid business. Those who were worried pointed to decreasing sales and an unfavourable business and economic environment.

Key findings on SMBs current perceptions of the economy

Perceptions of the current state of the economy declined 2 points to +15, however, this is the second highest score since December 2010 when it was +23.

Tasmania remains on top recording its highest score we have on record after a 19-point increase to +43. The NT is still at the foot of the pack on this indicator even though it recorded the largest net balance lift of 22 points to +3.

The proportion that thinks the economy is slowing was one point higher at 14% while the proportion that thinks it is growing fell from 30% to 29%.

Key findings on SMBs perceptions of the economy in a year’s time

Expectations for the economy in 12 months’ time remain optimistic with the net balance unchanged at +12 which is among the better scores observed since December 2013.

Consistent with the previous quarter, 27% think the economy will be better off in 12 months’ time and 15% think it will be worse off.

Key findings on SMB support for the Federal Government

Businesses believing Federal Government policies are supportive increased two points (22% to 24%), while those who say policies work against small business also increased by that amount (19% to 21%). The net balance was again at +3.

Following the recent budget, tax stands out among leading reasons given by SMBs for a favourable assessment of the Federal Government – it offers tax cuts (up from 10% to 18%), is trying to reduce tax (down from 10% to 6%) and it offers tax incentives (down from 9% to 4%). The next most prominent factor is its perceived support and interest in small businesses (down from 14% to 7%).

SMBs with a negative opinion of the Federal Government’s policies cited too much focus on big business (up from 15% to 20%), excessive bureaucracy (down from 18% to 13%) and high taxation (up from 4% to 13%) ahead of other factors.

The net balance was positive and improved in Tasmania, SA, the ACT and Queensland. It remained positive but lower in NEW SOUTH WALES. The NT remained the least supportive state or territory with a score of -8 (down one point) followed by Victoria on -2 (down 7 points) with WA remaining negative on -1 (unchanged). Tasmania became the most supportive (increasing 19 points to +20).

By industry, the most positive views are found in Cultural, Recreational and Personal Services (+17) followed by Building and Construction (+12). Negative opinions are seen in Accommodation, Cafes and Restaurants (-16), Manufacturing (-12), Retail Trade (-10) and Finance and Insurance (-7).

Key findings on SMB support for state and territory governments

The Tasmanian Government remains in the top spot, after a 17-point rise to a record high of +36.

In SA, the new Government’s score was 37 points higher than for the previous government last quarter reaching a record high for that state of +18. In recent quarters, the SA Government had been the most unpopular State Government.

The biggest fall was in the ACT, down 11 points to -2. It is accompanied by the NT, WA, Victorian and Queensland Governments in negative territory.

Key findings on Metropolitan versus regional

Metro businesses remain more confident by 8 points, (+52 versus +44).

Assurance rose by 5 points in metropolitan locations and by 10 points among regional Small and midsize businesses.

Metropolitan SMBs are again more positive than their regional counterparts about the economy’s strength now and in 12 months. Expectations for the key performance indicators this quarter are more positive in metropolitan areas.

Metropolitan SMBs (down 2 points to +18) assessed the current state of the economy more positively than regional Small and midsize businesses (unchanged at +12). They are also more optimistic about the prospects for the economy in one year’s time (+16 to +5).

Last quarter, metropolitan SMBs performed much better on sales (+7 and -5 respectively) and profitability (+2 to -11) with their wages balance also higher (+12 to +8). Performances were stronger in regional areas for employment (-2 compared to +2) and prices (+6 to +8).

For the current quarter, expectations are higher in metropolitan areas for all five key performance indicators: sales (+28 versus +20), profitability (+24 versus +12), employment (+12 versus +5), wages (+17 versus +13) and prices (+16 versus +14).

Metropolitan SMBs regard Federal Government’s policies for small business more favourably than those in regional areas with net balances of +6 and -3 respectively.

Queensland Small and medium business outlook

As we are a proud Brisbane based digital and creative agency in Queensland company, let’s look in details at Queensland.

Net confidence rose seven points among Queensland SMBs to +48 which is one point under the national average nevertheless 13 points higher than at the same time last year.

SMBs with confidence mentioned being an established, solid business and specific business strengths as primary influences. Concerned SMBs highlighted falling sales ahead of an unfavourable business environment and government policy as their main worries.

Last quarter saw improved but still negative balances for sales, employment and profitability in Queensland. Though, there were more positive balances for prices and wages.

Expectations for the five key performance indicators this quarter are all positive lifting for sales and wages with employment steady. The balances for prices and profitability were lower.

The State Government’s rating improved 3 points but is the lowest of all State or Territory Governments at -16. Excessive bureaucracy followed by too much notice taken of unions were the leading criticisms. Queensland SMBs with a positive view identified infrastructure development and good policies as the key influences.

Confidence lifted despite a challenging quarter and sits just under the national average. Queensland SMBs are optimistic about key performance indicators this quarter. The Queensland State Government is the least popular in Australia among SMBs.

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