SME business conditions sink, RBA slashes growth forecast, mortgage fund re-opens: Economy roundup

The bad news keeps coming for small business. The NAB SME survey for September 2008 reveals business conditions for the quarter are the worst since 2001.

The survey also shows only 23% of SMEs are reporting good conditions, compared to 27% in the pervious quarter. The number of businesses reporting poor or very poor business conditions has jumped 5% to 24%.

Geoff Greer, NAB’s regional general manager of business banking Australia, says all businesses are suffering.

“Business conditions across the world are very difficult at the moment and suggest that businesses, regardless of size, are doing it tough,” he says.

Still, there is one bright spot – Greer says SMEs are doing much better than larger businesses.

“SMEs are still faring better than their larger counterparts and will be keenly watching the economic conditions and hoping for a bounce from the Federal Government’s $10.4 billion economic stimulus package.”

In more worrying economic news, the Reserve Bank of Australia has slashed its growth forecast for 2009 to 1.5%, well under the Federal Government’s forecast of 2% growth.

But the bank does expect inflation to fall. “On balance it appears likely that underlying inflation is now reaching a peak in quarterly terms and that it will begin to decline over the next few quarters.”

Australian sharemarkets have started the week on a strong note. The benchmark S&P/ASX200 index was up 95.8 points or 2.36% to 4147.1 at 11.30am AEST.

The big winners of the morning were BHP, which jumped 4.3% to $29.14, and Telstra, which gained 3.3% to $4.44.

The dollar also opened stronger following the news of a Chinese $US600 billion spending package, moving up 0.64% to $US69 cents.

In corporate news, NAB has also announced it will raise $2 billion through a share placement to seek larger growth opportunities and allow it to hasten its capital management program.

Meanwhile, Perpetual has re-opened applications for its funds after suspending the practice when the Government ruled out deposit guarantees for mortgage funds.

The move is an attempt to restore investor confidence, according to group executive income and multi-sector, Richard Brandweiner.

Overseas, Group of 20 central bank and finance officials have said they will work together to solve the global financial crisis, and encourage economic growth.

Following a meeting in Brazil, the G20 released a statement saying inflationary pressures have decreased, but some nations must endure “more persistent” inflation in the meantime.

“We stand ready to urgently take forward work in action agreed by our leaders to restore and maintain financial stability and support global growth,” the group says.