The Westpac-Melbourne Institute SME Index results show business confidence rose by 3.2 per cent in the third quarter of the year.
Westpac says the Index, which examines the economic health of Australian small and medium sized enterprises (SMEs) shifted above the 100-neutral mark for the first time in the year, rising from 97.6 in Q2 2017 to 100.7 in Q3 2017.
According to Westpac, despite Q3 being another challenging quarter, SMEs are strongly optimistic about future conditions as they approach the holiday season. As expected, consumer-facing industries such as wholesale and retail trade and hospitality and recreation services were among the most optimistic. However, other sectors such as manufacturing and health and aged care services also reported higher levels of confidence.
“It’s pleasing to see uplift in business confidence, regardless of difficult current conditions,” Westpac Senior Economist Matthew Hassan said.
“Australian businesses appear to still be optimistic and planning for the year ahead. SME owners expect to see the number of staff in their business grow within the next 12 months, and the Index found several SMEs are continuing to increase their levels of investment.”
Victoria and New South Wales proved to be the winners in SME confidence, with increases of 25.7 per cent in Victoria and 8.3 per cent in New South Wales.
“The state results continue to show a very uneven profile with the wedge between strong and weak widening materially during the last quarter,” Mr Hassan said. “Some of this likely reflects developments in the housing sector, with fears of a hard landing in NSW and Victoria easing somewhat, and conditions in Queensland and Western Australia failing to meet earlier expectations of a recovery.
“Pressure from rising overheads and costs is also a common theme across all SMEs. The state detail here suggests the underlying concern is around recent sharp increases in energy costs with SMEs in South Australia – the state being most heavily impacted by energy concerns – reporting particularly high levels of concern.”
The Index also showed an alarming disparity in SME confidence between organisations that use automated HR tools (eg software and apps) and those managing their HR administration manually. Those using automated tools have an average SME Index score of 111.8, and those manually managing HR admin scoring an average Index of 94.9.
