Small Business Optimistic Despite Challenging Economic Outlook
24 February 2014
Inaugural Westpac-Melbourne Institute Small Business Index highlights resilience of critical sector of the economy
- Small business performance holding up as index shows rating of 119.4
- Four out of five small business owners expect sales to increase or at least stay the same while net employment is predicted to increase or remain the same
- Challenges remain with the national economic outlook, tougher competition and over-regulation cited as major hurdles
Australia’s small businesses are feeling positive about their current and future performance, with the first Westpac-Melbourne Institute Small Business Index sitting at 119.4.
The Index indicates that Australia’s small businesses are performing better than they were three months ago (116.7 past performance versus 132.9 current performance). Ratings of above 100 shows businesses are more positive than negative about their outlook for the next three months. Four in five (83%) small businesses expect their activity and sales to either increase or stay the same over the next three months. Only 16% believe their activity and sales will decrease.
“It’s encouraging to see positivity amongst small businesses, especially in the context of a challenging economic environment. Small business is the backbone of the Australian economy and their sentiment can often be a barometer for the national economy,” said Julie Rynski, Westpac’s General Manager of Small Business.
“The Index revealed some promising indicators for the Australian economy more broadly over the next three months, including a net 5%1 intention to increase staff levels and net of more than a quarter (27%)2 of small businesses expecting activity to increase.”
While almost one in ten small businesses indicated they were intending to seek credit in the next three months, ‘finance’ (cash flow and access to credit) was cited as the fourth most negative factor impacting small businesses.
“There is a perception in the small business community that accessing credit is almost impossible. At Westpac we want to send a clear message that we are open for small business; we are here to back you. Westpac is looking to inject a minimum of $1.5 billion in new lending to SME businesses during 2014,” said Ms Rynski.
Small business optimism remains despite the sector identifying Australia’s current economic position (35%) as the number one negative impact on their businesses, followed by ‘customer relationships and sales’ (27.1%) and ‘regulation’ (22.8%) respectively. One of the top contributors to costs for businesses was ‘administration’, indicating that complying with excessive regulation could be hurting small businesses.
“The Government is busy putting in place the policy foundations to see a renaissance in enterprise after years of deterioration in the sector.
“It is our belief that our best days as a nation are still ahead of us and that is particularly the case for small business. Information from an Index like this stimulates much needed discussion about an often overlooked sector of our economy,” said the Hon. Bruce Billson Minister for Small Business.
Westpac has 640,000 small business customers that are serviced by 680 dedicated small business bankers across Australia.
1 Net intention to hire 15.7% for those who expect to increase employment levels minus the 10.8% for those who expect them to decrease.
2 Net expectation of activity / sales to increase equals 42.9% of those who expect activity to increase minus the 16% who expect it to decrease.