The latest NAB Quarterly Business Survey revealed that while confidence among Australia’s small and medium enterprises (SMEs) has improved during the 2024 Q4 period, the uplift was not enough to take the confidence levels out of the negative figure territory.
In detail, SME business confidence improved by three points to -11 index points but remains well below average (+2 index points). In addition, SME confidence is negative across all industries except transport (which is only just positive at +1 index point).
The report noted that this improvement was driven by large increases not only in the transport sector but also in the accommodation, health, and manufacturing sectors. However, SME business confidence and conditions remained notably weaker overall if compared to larger businesses.
Furthermore, the report found that business conditions fell for SMEs, led by a large decline in business services. SME business conditions fell one point to -4 index points. Conditions for the smallest SMEs fell by three points to -5 index points, though larger SMEs saw conditions ease by two points. Conditions remain weakest for mid-tier SMEs, even with a small improvement in Q4 (up one point to -7 index points).
By industry, SME conditions declined materially in business services (down 18 points). This was followed by smaller declines in finance (down six points), construction (down four points), transport (down two points) and retail (down one point). However, finance and business remain the strongest industries for SME conditions in level terms. Conditions are weakest in manufacturing, accommodation and retail.
According to the report, the findings suggest that despite some improvements, such as the easing of cost pressures, especially for labour costs, and the easing pace of output price growth, the business environment remains challenging for SMEs. Labour availability remains a significant constraint for around 30 per cent of firms (though this level has stabilised in recent surveys) though the share of firms reporting sales as a significant constraint eased slightly in Q4 which may reflect the improvement in trading conditions at the end of 2024.
