Small Business Confidence pulls back from record high, but Victoria still lagging.

A survey of Australian Small and Medium sized buisnesses, has shown that for the first three months of 2021, conditions for Victorian small and medium businesses are the worst in the country.

While Australia as a whole reported improvement in conditions in the NAB SME Business Survey, Victoria and NSW continue to lag the other states. Likewise, after softening in both states, confidence remains weakest in Vic and NSW .

According to Alan Oster, NAB Group Chief Economist: “The survey shows that like larger businesses, the SME sector saw a continued recovery in Q1.” Further, Mr Oster said “SME business confidence pulled back slightly but remains high.”

“Conditions and confidence are well into positive territory across all states but there is a gap emerging between NSW and Vic who are lagging the others” said Mr Oster. “The dispersion of outcomes across states is slightly more evident than reported by larger businesses in our Quarterly Business Survey but for now everywhere appears to be improving.”

Conditions for small and medium enterprises (SMEs) in Victoria were at 5 index points, clearly the lowest in the country and well below the overall figure for Australia, which is at 14 points.  The Victorian number was the same as it was for the last three months of 2020. SME confidence in Victoria is also among the lowest in Australia.

Shadow Treasurer Louise Staley said “These latest figures show that small and medium businesses in Victoria are still struggling compared to the rest of the country.

“It has been small businesses that have been hardest hit by the COVID-19 pandemic and three lockdowns in Victoria. Despite this, the Andrews Labor Government has refused to provide the level of support needed to get small businesses in Victoria going again. The results from this latest survey not only show that conditions are not improving for Victorian small businesses, but that small business confidence is suffering as a result.”

By industry, Accommodation, cafes & restaurants (up 13pts), Property services (up 8pts) and Construction (up 7pts) led the gains in conditions. Indeed, most industries saw improving conditions in Q1, except for Retail (down 13pts), Health (down 9pts) and Transport (down 5pts).

According to Mr Oster “The sectors which were most impacted by the pandemic continued to rebound in the quarter.” Further, Mr Oster said “Across industries, Property, Finance and Health are now strongest – though all sectors are back in positive territory.”

Leading indicators improved further in the quarter. Forward orders rose further and is now well above average, while capacity utilisation and reported capex also rose further.

According to Mr Oster: “The ongoing strengthening in leading indicators alongside still high confidence, suggests that for now the gains in business conditions are likely to be sustained”.

The NAB SME Survey is the leading survey of small and medium businesses in Australia and complements the comprehensive Quarterly NAB Business Survey (QBS) which covers larger businesses. The SME survey offers a rich repertoire of insights into factors affecting smaller firms’ conditions by state, industry and size, as well as an assessment of their outlook for investment and output.