Small business confidence high despite economic shortfalls

By Nick Hall | 19 Aug 2019 View comments

Australian small business confidence is high despite floundering economic conditions, a new report has revealed.

According to the latest Sensis Business Index, which surveyed more than 1000 small and medium business owners and managers across metropolitan and regional areas, more than half of Australian businesses are unconcerned with the current state of the economy.

The index revealed that 57 per cent of respondents are now confident in their prospects over the next 12 months, with Tasmania leading the way.

John Allan, Sensis CEO said the surprising results indicate the nation’s SME operators are remaining positive in the face of evolving conditions.

“It’s great to see more than half of small and medium businesses across the nation feeling upbeat about their business outlook post-election, despite their concerns about the current state of the economy,” Allan said.

Despite the positivity, one in three business owners and managers still believe the economy is slowing, while one in two believe it is at a standstill. Where there is room for improvement is in economic stability and perceived lack of government support.

A total of 22 per cent of businesses expect an improvement in the economy over the next 12 months, with 30 per cent indicating they believe the situation will get worse.

Small business growth

The Sensis results come at an interesting time for the small business sector. A recent study from the Institute of Public Affairs (IPA) indicate sector growth was in crisis.

Kate Carnell, Australian Small Business and Family Enterprise Ombudsman urged the government to do more to break down the barriers to business expansion.

“What concerns me greatly about this report’s findings is the sharp drop in the percentage of small businesses hiring additional staff,” Carnell said.

“Less than one per cent of small businesses with 1 to 4 employees in 2017, employed more than four workers in 2018. That’s significantly below the historical transition rate of 6 per cent.”

Carnell suggested that the major issue restricting small business growth was Australia’s rigid industrial relations system.

“The research cites World Economic Forum surveys, which have consistently found Australia’s Labour Market regulation is the most problematic factor for doing business,” she said.

“Part of that broad picture is ensuring small business owners can feel confident they can meet their obligations and avoid an unfair dismissal claim in the event they need to let a worker go. The government has announced a review into the industrial relations system. The Small Business Fair Dismissal Code should be number one on that agenda.”

Government policy affecting small business confidence

The Australian Small Business and Family Enterprise Ombudsman isn’t the only one advocating for stronger government reform.

According to the Sensis small business confidence report, 36 per cent of operators said that the current Federal Government policies for small business are having no impact.

“Over the years we have seen a growing perception among SMBs that Federal Government policies do not affect them and our latest index further cements this,” Allan said.

Less than one in three Australia small businesses applied for the $30,000 instant asset write-off introduced by the Federal Government this year. A lack of funds and spending was behind the failure to adopt, with only the major industries of manufacturing and building taking advantage of the scheme.

Access to finance

Funding and finance were consistent issues identified throughout the small business confidence report. The index found that 30 per cent of business owners and managers believe that it is harder to access finance than it was six months ago, with regional operators feeling the full force of tightening lending conditions.

As a result, a quarter of businesses are using credit cards to access finance, and more than one in five are increasing their overdraft facilities.

With economic analysts predicting a recession could be on the way, the role of alternative lending in the franchise sector could prove critical. Franchisors looking to boost network numbers will continue to face a difficult lending environment, which threatens to halt franchise growth.

Regardless, the latest small business confidence report indicates there is still a positive SME outlook and culture in Australia, which, amid a challenging economic landscape is an encouraging sign for the franchise sector.