Business confidence declines overall but some states shine through the gloom

Confidence levels of Australian small and medium businesses have declined for the third consecutive quarter according to the September Sensis Business Index released today.

The quarterly Business Index survey of 1800 businesses found that while 50 per cent of businesses said they were confident about their prospects, a further 33 per cent said they were concerned – representing a six percentage point fall in confidence since the last survey.

The decline in confidence is not consistent across the country however, with small and medium businesses in Western Australia, Tasmania, South Australia and the Australian Capital Territory reporting increased confidence over the past three months.

Report author Christena Singh said the main reason businesses gave for feeling worried about their prospects were concerns about consumer spending, a decrease in business, and the general economic outlook.

“Businesses actually reported a slight increase in sales during the quarter,” Ms Singh said, “but this has partially come at the expense of margins, with a fall in profitability, as well as falls in employment and capital expenditure.”

Looking ahead, businesses are expecting this trend to continue over the next 12 months, anticipating an increase in sales offset by a fall in profitability, employment and capital expenditure. 

“Fifty-one per cent of businesses expect an increase in the value of sales over the next year, however 46 per cent also say they also expect an increase in prices charged,” Ms Singh said.

A lack of work or sales remains the most pressing concern faced by small and medium businesses in the latest survey, increasing three percentage points during the last quarter to 25 per cent, which is the highest level since the inception of the Sensis Business Index in 1993.  More than one in four businesses, however, said they weren’t currently facing any significant problems in their business.

Despite businesses of all sizes recording falling perceptions of the economy, small businesses (those employing 19 people or fewer) held much more negative views on the current state of the economy, and were also more negative about how they see economic conditions in the year ahead.  Small business confidence was nine percentage points lower than medium business confidence in this quarter.

Across the sectors, confidence is highest in the health and community services sector and lowest in the transport and storage sector.  Looking ahead, businesses in the manufacturing sector were the least likely to be expecting an increase in sales, employment, wages, prices and profitability in the next quarter.

The highest level of business confidence was recorded in the Australian Capital Territory, which saw a 25 percentage point increase in confidence in the past quarter.  Confidence also rose in Western Australia, Tasmania and South Australia, although business in South Australia remains the least confident of all states and territories at levels significantly below the rest of the country.

The largest falls in confidence were recorded in Victoria, where confidence was down by 12 percentage points, with confidence dropping by 11 percentage points in New South Wales.  There was no change in business confidence in Queensland over the quarter.