Australia | Aug 06 2009
By Rudi Filapek-Vandyck
Economists at National Australia Bank report their June SME survey shows the profitability outlook for small business throughout Australia has turned positive for the first time since September 2008. As such, say the economists, the report suggests the start of improving economic conditions could be in sight.
The survey found that whilst it remained tough for many SMEs across the country, there was nevertheless a “small improvement” in business conditions after a number of quarters of declines. NAB’s SME business conditions index improved by two points to minus 10 in the June quarter, while larger businesses showed an index score of minus 12 after experiencing substantial drops in activity in the March quarter.
Geoff Greer, Executive General Manager nabbusiness, points out SME businesses are the real economic drivers in Australia. This is why he thinks the outcome of the NAB survey will be welcome news to businesses and governments.
According to the survey, the profitability outlook improved considerably scross all sized SMEs, from an Index of minus 27 to 1.
Looking at business size, mid-sized SMEs (annual turnover between $3-5m) saw a considerable improvement in business conditions and were the best performing segment with minus 6 index points.
SMEs in SA and WA recorded the best business conditions, closely followed by NSW which all performed better than the national average. Victoria dropped from above average last quarter to below average this quarter. Queensland was also well behind the national average, although the state experienced improved conditions in the health and property sectors, according to NAB.
As far as specific sectors go, finance, insurance and retail recorded the strongest improvement in business conditions this quarter while property services recorded positive business conditions, spurred by the extension to the first home owner’s grant. Health also experienced a positive quarter while manufacturing and construction continue to suffer.
Business confidence among SMEs improved significantly, by 15 points from minus 22 to minus 7.
In terms of the annual profitability outlook, small and medium enterprises have a positive view of the future. From the lows of the March quarter, annual expectations surged 28 points to a positive reading of 1 index point. They were, however, slightly less optimistic than larger businesses at 3 index points.
For small SMEs, the outlook is positive in the health, finance, wholesale and transport industries, for medium sized business the outlook is strong in the property, accommodation and transport sector and for larger SMEs, the outlook is best in property, finance, transport and health, according to the survey.