Economy slips on road to recovery
Christena Singh | 10 June 2010
Business confidence among small and medium businesses was just one percentage point higher than it was a year ago according to the latest Sensis® Business Index, released today.
The index recorded the largest single-quarter fall in business confidence among SMEs in the history of the index (which started back in 1993), which was larger than anything measured in a single quarter during the global financial crisis.
And it’s not hard to see why.
Businesses are saying that they are seeing business falling and customers not spending. Business confidence rose strongly out of the GFC, but Australia’s SMEs are yet to reap the benefits of economic recovery. They are yet to record a net positive quarter of profitability, that is, one where more businesses record increasing profits than decreasing ones. The last time that happened was back in February 2008.
SMEs are definitely saying that they are doing it tough, with more believing that the economy is slowing rather than growing. And their perceptions of the Federal Government have also fallen sharply in the past quarter.
The Australian economy has done well throughout the economic downturn compared to most other developed economies. We have not had a recession. But to get sustainable growth back into our economy requires business growth and investment to improve.
So, this quarter, seeing the largest single quarter fall in business confidence since the inception of the survey made me recall the last time I reported this, back in November 2007, before the last election and before other economic signals started heading downward – small businesses reported the first signs of the GFC hitting Australia. Hopefully this quarter’s fall will not be replicated in successive quarters as happened throughout the GFC.
That is why this quarter’s results are so important, because they show so starkly that Australia’s small and medium businesses, the backbone of our economy, are finding economic conditions worsening. It is important that we listen to what small businesses are telling us this time.
For example, as you can see in the attached chart, the sales performance indicator is some four percentage points lower, profitability five percentage points lower and capital expenditure nine percentage points lower. The indicator that is closest to its long term average is employment, which is only one percentage point lower.







