Business confidence halves in three months

Australia’s slide towards recession is destroying the confidence of small and medium business owners, with the latest Sensis Business Index revealing confidence has almost halved in the three months to an historic low.

Australia’s slide towards recession is destroying the confidence of small and medium business owners, with the latest Sensis Business Index revealing confidence has almost halved in the three months to an historic low.

Business confidence is less than one-third of the level recorded at the same time last year, and the business confidence indicator has fallen 12 percentage points over the last three months to 13%.

Business confidence in New South Wales is the lowest in the nation at 5%, while Tasmania has the highest level at 37%. Western Australia experienced the biggest fall, down 29 percentage points to 14%.

Report author Christina Singh says confidence had plummeted on the back of weakening economic conditions.

“Until small businesses see the registers beginning to ring again, they are likely to remain pessimistic about their business prospects ad this will continue to impact employment and capital expenditure spending.”

About half of small businesses experienced a decrease in profit during the last three months, while around one third reduced capital expenditure during the quarter.

Singh says the outlook is poor, with almost half of businesses believing the economy will be worse off in 12 months.

“Despite recent interest rate reductions, falling petrol prices and the announcement of a government stimulus package, the majority of businesses expect the economy will be worse off in the next 12 months.”

Concerns about the skills crisis appear to have abated. Over the last three months, 16% of businesses reduced employment, and the majority of these did so because of weak business and economic conditions. By comparison, only 12% increased the size of their workforce.

SMEs remain unimpressed with the Rudd Government. While support for the Federal Government rose 15 percentage points, the indicator remains at negative 13%, compared with positive 29% this time last year, before the change of government.