Quarterly SME Survey – March Quarter 2015

SMEs’ quarterly business conditions remained largely stable in the first quarter of 2015, with firms from all tiers showing broadly similar conditions from the previous quarter. SME trading and profitability conditions have deteriorated, offset by improved employment conditions overall.

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Key Points:

  • SMEs’ quarterly business conditions remained largely stable in the first quarter of 2015 at +2 index points (rounded), with firms from all tiers: low, mid and high showing broadly similar conditions from the previous quarter. At the sub-component level, SME trading and profitability conditions have deteriorated, but this is offset by improved employment conditions overall.
  • Analysis by the size of SME businesses continues to highlight the divergent trends in the performance of low-tiered firms relative to their larger counterparts. Low tiered SME firms with $2-3m revenue turnover have fared the worst consistently across all measures of business conditions and confidence, with significantly poorer cash flows and profitability indices particularly concerning. The rule that performance typically improves with firm size applied in most cases, except that mid-tier firms fared better in employment conditions relative to the largest SME firms in the quarter.
  • Conditions were mixed across industries in the quarter. Property services and finance firms continued to do well, despite a notable weakening of the former in the quarter, while accommodations, cafés and restaurants recorded a sharp rebound back into positive territory. Wholesale and transport recorded the weakest business conditions after a marked deterioration in the quarter, while retail businesses continued to be mired in negative territory. Conditions in manufacturing improved notably to be around the neutral mark.
  • Similar to business conditions, SME business confidence was also stable in the first quarter of 2015. Confidence by SMEs was slightly higher than general businesses as measured by the NAB Quarterly Business Survey (QBS). Among different industries, property and manufacturing firms were the most confident, while health firms slid further down the scale to be the least confident sector at -20 index points. Transport firms experienced the sharpest decline of 13 points to -4. Rising property prices and a stable AUD at a lower level have benefited the confidence of SME property and manufacturing firms, but the recent rebound in oil prices and uncertainty surrounding government funding have plagued the confidence of transport and health sectors respectively.
  • Conditions across states were generally lower in the quarter, with the exception being Victoria, which enjoyed a surge in both conditions and confidence and emerged as the top in both measures. NSW also recorded positive confidence and conditions in the quarter, despite a slight fall in the latter indicator. On the contrary, conditions and confidence in WA have deteriorated further to be the weakest of all states in both measures, followed by Queensland.
  • Forward orders fell into negative territory in the quarter, reflecting by consistent falls across differently sized firms. SMEs’ capacity utilisation mirrored the trends in confidence and conditions to stabilise around 79% , but remained below its long-term average of 80%.

For further details, please see the attached document.