ACA Research’s latest SME Sentiment Tracker showed after a long road back and a strong Christmas period, SME revenue, profit, and confidence are softer in 2023, with 40 per cent of SMEs reporting lower revenues than before the pandemic and only 43 per cent reporting a profit in January.
Sentiment about the Australian economy has also dropped significantly with 69 per cent expecting weaker conditions over the next three months in comparison to 54 per cent in December.
The number of growth-focused SMEs is also continuing to decline to just 32 per cent, from a high of 43 per cent in August.
The tracker found that concerns about rising costs are significantly impacting SMEs, with 83 per cent now concerned about inflation and rising interest rates. To offset higher costs, 63 per cent of SMEs have increased their prices, but the majority have only partially recouped the extra costs.
Business conditions are impacting investment intentions across the board, with many SMEs expecting to decrease capital investment (27 per cent), employee numbers (15 per cent), and wage growth (13 per cent) over the next three months.
The demand for additional finance also continues to decline as interest rate hikes persist. Only 7 per cent expect to incur more debt over the next three months compared to 15 per cent in December and 12 per cent of SMEs reported they will have difficulties meeting their existing loan repayments over the next six months.
Support for the government has also declined with only 34 per cent of SMEs satisfied with the ability of the government to deliver effective policies that support their business needs.
On top of failing small-business confidence, consumer confidence also decreased by 0.1 points last week to 79.9.
“Consumer confidence remained virtually unchanged — and very low — in the week to 5 March,” ANZ senior economist Adelaide Timbrell said.
“It was the fourth-consecutive week with confidence among the worst 12 results since the COVID-19 outbreak in Australia.
“Among those paying off their mortgage, confidence rebounded 2.9 points after a sharp fall the week before. Confidence among those who own their home outright and those renting declined 2.2 points and 0.4 points respectively, but still ended the week with higher confidence than indebted owners.
“Time to buy a major household item declined to its fifth-lowest result since the COVID-19 outbreak, while current finances dropped to its fourth-worst result since COVID-19. Confidence about future financial and economic conditions rose during the week.”
