31 July 2017

Small business confidence drops but ACT still leads nation

| Ian Bushnell
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Small business

The ACT’s small to medium-sized businesses remain the most optimistic in the country despite a drop in confidence last quarter, according to the latest Sensis Business Index survey.

The survey recorded a 12 point fall in net confidence to +52 but this did not dislodge the ACT from its leadership position.

It found confidence was driven by increasing sales ahead of being an established, solid business, while a low level of confidence reflected falling sales much more than other difficulties.

Last quarter, all key indicator performances were lower although the sales and profitability balances were higher than in other states or territories.

The survey said outlook for this quarter on all key indicators was the most optimistic or among the most optimistic with expectations for sales, employment, wages, prices and profitability all up on last quarter and in positive territory.

The ACT Government was also more popular with small business last quarter with its rating up 21 points to +15.

“Positive ratings mostly reflect a view that the ACT Government is supportive, interested and trying to help small business,” the survey said.

But concerns about excessive bureaucracy and a lack of clear policies or direction for small business remain.

Nationally, confidence fell five points to +39 on a net basis, driven by negative sales, employment and profitability results.

The survey found six out of 10 industries were going backwards with retail struggling the most.

The net balance of +39 is calculated by comparing the number of confident SMBs (57%) to the number who are worried (18%).

Sensis Executive General Manager, James Ciuffetelli said confidence had dropped after hitting the highest level in more than six years in December.

“We saw declines in all of the key indicators this quarter, with business owners particularly feeling the pinch on sales and employment,” he said.

The result would have been worse were it not for the strong result among regional businesses, with regional business confidence now sitting at the highest level in more than seven years, after rising seven points to +47.

The Index, which reflects the views of 1000 small and medium businesses from across Australia, also revealed that SMBs responded favourably to the Federal Budget, with the Government’s approval rating jumping eight points to +6 on a net basis.

“Last quarter confidence in the Federal Government fell into negative territory but it has bounced back strongly this quarter following a popular Federal Budget which has resulted in more businesses seeing the Government as supportive of their needs,” said Mr Ciuffetelli.

“The key reason behind the boost in the Government’s fortunes was the popularity of the $20,000 instant depreciation benefit for asset purchases made by businesses with a turnover of $10 million or less announced in the Federal Budget.”

Across the states and territories, the ACT was still the most confident location, despite suffering the biggest fall this quarter.

Only WA businesses increased in confidence, in the first survey taken since the state election in March. Confidence went backwards in all other locations.

The survey found at an industry level that there were mixed results, with six out of 10 industries going backwards. Health and community services continues to lead the way, while there were considerable jumps in confidence in manufacturing and wholesale trade, with expectations for strong sales to continue this quarter.

“Businesses in retail are struggling the most, while those in hospitality suffered a 21 point drop in confidence this quarter, driven by poor profitability results. It was also the businesses in these two sectors that have the lowest approval ratings of the Federal Government,” said Mr Ciuffetelli.

The net balance score for current perceptions of the economy now sits at +1, while the expectation for the economy in a year’s time sits at +9, after both scores fell one point this quarter.

“Businesses are finding it much harder to access finance than they were six months ago and concerns around sales are continuing to act as a barrier to employers taking on new staff. The good news is that all of the forward indicators remain positive, although none have improved this quarter,” said Mr Ciuffetelli.

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Dun and Bradstreet’s Failed Businesses Report revealed in 2016 the ACT recorded its highest number of business failures in three years.

In a three-month period, between July and September, more than 200 business closed up shop.

It would appear that Canberra still has a bit of pain to absorb, especially in the hospitality sector.

Great story Ian. it’s one of those things really. If you see cranes in the sky and works taking place on the roads it bring a sense of confidence to other businesses and the community as a whole. I’m not surprised business confidence is high in Canberra. Let’s hope this continues and that the community, government and business continue to grow our wonderful city.

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