Australia | Nov 17 2009
By Chris Shaw
The improvement in economic conditions in Australia appears to be working its way down the scale as the latest National Australia Bank SME (small to medium enterprises) Quarterly Survey, covering the three months to the end of September, has shown business conditions in the smaler business end of the market have returned to positive levels for the first time since the Global Financial Crisis began in September of 2008.
In the period the larger SMEs recorded the strongest gains, those with annual turnover of between $5-$10 million recording an index reading of plus six, up from a minus 13 reading in the June quarter. Small SMEs, being those with turnover of 2-$3 million, rose to a plus four reading from minus seven, while the mid sized SMEs with turnover of $3-$5 million improved to a reading of plus three from minus six previously.
Driving the improvement was a sharp increase in customer confidence and demand, while positive seasonal and competitive factors also helped deliver improved results. All states with the exception of Western Australia posted gains, the Victorian reading increasing to plus eight from minus 12 and the New South Wales number also rising to plus eight from minus nine previously.
Queensland remains in negative territory at a minus one reading, though this is up from minus 14 previously, while in Western Australia the reading fell to minus 10 from minus six previously. In sector terms the health and wholesaling and finance sectors were the best performers, while the survey shows conditions remain weak in transport, retail and most parts of the construction and manufacturing sectors.
The numbers show SME profit growth increased to a plus three reading from minus 12 previously, while the annual profitability outlook reading jumped 26 points to a reading of plus 27. For small size SMEs the profit outlook is most positive in the health, wholesale and transport and finance sectors, while among the mid sized SMEs the outlook is best among the health, finance, property and manufacturing sectors. Among the larger SMEs the health, business services, finance and transport sectors are most positive with respect to the profit outlook.
Weak demand is the greatest concern with respect to profits, followed by government policies, wage costs, labour availability and then other issues such as competition, funding costs and the availability of materials.
Business confidence levels among SMEs in Australia also rose strongly, the survey showing an increase in this reading of 22 points to a plus 15 reading, bringing the sector almost in line with larger enterprises where the confidence reading is currently plus 16.
All three segments of the SME market were more optimistic than was the case a quarter ago, while all sectors are positive on the outlook for the December quarter as well. There was a small difference between the sectors however, the survey showing large SMEs are the most optimistic at a plus 18 reading, compared to readings of plus 14 and plus 13 respectively for the mid and smaller size SMEs.
The most optimistic sector was transport operators, followed by health, wholesale, finance, business services and property services. In contrast, retailers were the least optimistic on the outlook in business confidence terms.