Commercial businesses with aggregated turnover of between $5m and $50m have shown remarkable resilience, with significant liquidity and continued investment in equipment and financing growing at more than triple the rate of growth in working capital.
"We’re seeing a continuing trend where businesses in the middle market are performing strongly. They’re focusing on capacity expansion and long-term growth and it’s encouraging to see them investing for the future.” said Mr Howell.
In the SME space (businesses with aggregated turnover of less than $5m) there remains pockets of stress, but encouragingly a growing number of SMEs are now also seeing cashflow improve and stabilise.
“We know there are businesses still doing it tough who aren’t out of the woods yet, particularly at the smaller end of the market and we want them to know we are here to help,” added Mr Howell.
More than three quarters of industries saw improvement and the services sector, including recreation, accommodation, and healthcare, recorded the largest gains in cashflow conditions. The education sector also saw a solid rebound in turnover, driven by an increase in international university fees and student intake.
"The performance of the services sector is particularly noteworthy. These gains reflect the sector's adaptability and its critical role in the broader economy," said Mr Howell.
Meanwhile the agriculture sector faced challenges in the quarter. Cyclone Alfred caused significant damage in Queensland and Northern NSW, while widespread drought impacted parts of Victoria, South Australia, Tasmania and Western Australia.
"In some regions the agriculture sector has had a tough quarter, that’s why it is important that we support our agribusiness customers through the cycles. We know we’ll always see ups and downs in different seasons, and we hope Australian farmers get the rain where it's needed over the coming months," said Mr Howell.
Following the implementation of broad-based and higher than expected tariffs by the US in April, businesses are facing a more challenging global backdrop, however the net impact on Australia is expected to be limited. Based on the May Market Outlook, Westpac sees 2025 GDP growth at 1.9% down from 2.2% in the February report.
“Australian businesses are faring well despite the challenging global backdrop. Sentiment is strong with the benefits from moderate wage growth, easing inflation and further RBA rate cuts expected to support a gradual lift in private sector demand over the coming year,” said Mr Howell.
Read the full report here: Westpac Quarterly Business Snapshot Q1 2025 | Westpac IQ
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