SMEs confident but job cuts still on the agenda

Small business optimism over the Australia’s economy is at a 10-year high, a new report shows.

The latest Sensis Business Index, released today, shows confidence increased 20 points to 50% in the September quarter and is now at the highest level since the global credit crunch began.

Optimists now number 65%, while only 15% of small and medium businesses were pessimistic about the country’s economic outlook.

“They have not been this optimistic about the outlook for business profitability since February 2008,” the report’s author Christena Singh says.

“Small business sales expectations for the future are nearly as strong as those in August 2007, when they peaked before the economic downturn hit.”

The jump is the highest since the Index began in 1993. “Businesses are consistently seeing that performance is higher then expect, whereas usually it’s the other way around. But we’ve got to remember we’re coming off a very low base in the previous quarter,” Singh says.

In addition, demand for goods and services grew, with the sales indicator improving from -14 to 0%.

Just 13% of small businesses said they were currently impacted by the economic conditions, down from 36% in the previous quarter.

“Businesses are expecting their operations to perform significantly better in the next 12 months,” Singh says.

“We are now seeing two very strong quarters of improvement. However, improvements in confidence and expectations have been stronger than the improvements in actual performance, so there are still risks to the sustainability of the current economic recovery.”

But employment figures have not yet caught up with the optimistic outlook, with 15% of small businesses decreasing their workforce size over the quarter and 10% increasing staff numbers.

This means that businesses shed staff at a higher rate during the September quarter than the previous one.

“We had seen some improvement in employment coming from the small business sector last quarter. Unfortunately, this quarter has reversed almost all of that growth,” Singh says.

“Employment is one of those areas that tends to see long-term changes, so it tends to be a bit of a lagging indicator. We expect to see those figures increase in the coming quarter, but as they catch up with the increase in confidence we will see that change.”

The report surveyed 1,800 small and medium enterprises with up to 199 employees, from regional and metropolitan areas around the country.