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SME business conditions reach record high pre-lockdown

By John Buckley
 — 1 minute read

Improved trading, profitability and employment conditions across the SME sector each reached record highs in the June quarter, as the benefits of the nation’s economic rebound have been shown to trickle down to smaller firms.

NAB released the results of its Q2 SME Business Survey last week that show that the SME sector recorded business conditions increase of 31 index points through the quarter, the highest level seen since the survey began in Q2 2006.

NAB chief economist Alan Oster said the results show that Australia’s economic recovery hasn’t just benefited large businesses, but SMEs, too, which recorded “little to no difference” in conditions and confidence than their larger counterparts.

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“The survey shows that the ongoing recovery in the economy flowed through to SMEs and not just large businesses,” Mr Oster said. “The high level of SME business conditions is testament to the speed of the recovery that has occurred in Australia.”

NSW led the survey with the largest gain in across-the-board conditions, while conditions were strongest in South Australia. Meanwhile, Victoria saw the weakest conditions, though still well above average, according to the results.

Despite recording the largest fall in business conditions in Q2, business confidence remains highest in Western Australia, while confidence fell in Victoria, which recorded the lowest confidence levels of any state.

Mr Oster said Victoria’s lag could be attributed to lockdown restrictions.

“Conditions and confidence were high, by historical standards, across all states, but Victoria lagged the other states in Q2,” Mr Oster said. “The outcome for Victoria might have been affected by the lockdown that began in late May, about midway through the survey period.”

The results found that business conditions were seen to improve across all industries, by at least 10 index points or more, with the transport industry the only exception, which recorded an increase of just two index points.

The industries to record the most improved business conditions were the property, finance and business industries, while the construction industry recorded the lowest.

Mr Oster said that while the rate of improvement varied by industry, it remains above average.

“While there is some variation in conditions by industry, conditions in all sectors were above average in Q2,” Mr Oster said. “Conditions were strongest in property services, both in absolute terms and relative to its historical average, consistent with the strength in the housing markets being shown by other indicators.

“Also worth noting is that, relative to their historical average, conditions were also particularly strong in retail and wholesale, consistent with the switch to goods consumption and towards non-store (i.e. online) sales seen in response to the pandemic.”

The survey’s results also saw leading indicators generally improve through the June quarter. Forward orders rose by four points, from 12 to 16 index points – another survey high.

Mr Oster said improvements across leading indicators are cause for optimism, and could signal higher levels of investment and employment, once businesses fully emerge from lockdowns.

“The ongoing strengthening in leading indicators provides a positive note for the future, as it suggests continued business investment and job gains,” Mr Oster said. “However, at least in the near term, conditions will be disrupted by recent and current lockdowns, particularly in NSW and Victoria.

 

SME business conditions reach record high pre-lockdown
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