Australian SMEs remain relatively resilient but are still lagging in the first quarter of 2016 according to the National Australia Bank’s (NAB) business survey.
Commenting on the finding NAB Group Chief Economist Alan Oster said, “While business conditions for SMEs have continued to lag behind the broader business community, they have been relatively resilient, supported by strong trading conditions in particular.”
The NAB’s SME business survey analyses factors affecting small businesses in each state and territory, industry and includes investment and output assessments.
Business conditions varied consistently across industries and states, however, the greatest performers in terms of population size and economic output were the eastern states but conditions elsewhere in the country all improved.
“On a state by state basis, New South Wales and Victoria remain the most resilient in terms of business conditions, but we were positively surprised by the strong gains in Queensland which recorded its first positive reading in 2 years,” said Oster.
This finding indicates that non-mining recovery will is finally gaining momentum in the north.
Conditions also fluctuated across firm size but small firms faced the “most challenging conditions”.
Small business confidence eased potentially reflecting the effects of the recent financial market turmoil, although forward-looking measures improved slightly, and the survey’s business conditions index remained unchanged at +3 during the quarter.
According to Mr Oster, “SMEs experienced a fall in confidence in Q1, which potentially reflected increased concerns by respondents in the quarter about financial market volatility and slowing global growth prospects. However global financial conditions have stabilised since the survey was conducted and the fall in confidence in the quarter could prove to be transitory.”
Service sectors outperformed traditional sectors during the quarter. This trend reflects the slowing housing market, said Oster, which is placing some pressure on small businesses in property and finance sectors in particular, and their conditions could worsen if the housing market cools further.
“Services targeted at households and tourists, such as health and accommodation, cafes and restaurants, continue to do very well. Lower energy costs might have also benefitted intermediary services such as wholesale and transport, of which conditions improved significantly in the quarter.”