February 11, 2021

NAB SME Business Survey: Quarter 4 2020

SME confidence hits a record high as conditions rebound

In this podcast, NAB Chief Economist, Alan Oster gives you a 10 minute summary of our SME Business Survey analysis.

Listen to the full podcast now. If listening on a mobile device, click listen in browser.


Small and medium businesses reported a sharp improvement in business conditions and confidence in Q4 2020, with SME confidence reaching its highest level since the survey began in 2006. Business conditions were less elevated, but rose to be around the strong levels last seen in 2018. By component, trading and profitability rose to 17pts and 13pts, from around zero in Q3, while employment also improved, to reach 3pts in Q4. The strength of this survey closely aligns with similar gains for larger businesses recorded in the NAB quarterly survey.

According to Alan Oster, NAB Group Chief Economist: “The survey shows the economic recovery so far has also supported our SME sector – a very positive sign for the economic recovery.” Further, Mr Oster said “SME business confidence is at a record high as activity bounces back from the pandemic-driven lows of last year.”

The improvement was broad-based across states, industries and business size, with Victoria seeing the biggest gains following the end of its long lockdown. Victorian SMEs report the strongest confidence, although conditions remain the weakest of any state.

“The turnaround in Victoria is remarkable. In the previous quarter, Victorian SME businesses were really struggling – but now the same businesses are the most confident in the country that the outlook is improving” said Mr Oster. “That said, even with a sharp bounce in business conditions, Victorian SMEs are still lagging behind the other states.”

By industry, leading the broad-based gains in SME confidence was Accommodation, cafes & restaurants (up 48pts) and Health (up 38pts). The biggest gains in SME conditions were in Retail and Personal services, which both rose 18 pts. Outside of Construction (-1 index point) and Personal services (-12 index points) all industries recorded positive conditions, suggesting most industries have returned to growth.

According to Mr Oster “SME business conditions and confidence is up, for all industries, with a particularly sharp turnaround in confidence for SMEs in Accommodation, cafes & restaurants reflecting further easing in restrictions.” Further, Mr Oster said “Across the survey, most industries are reporting positive conditions, where Health and Retail are standouts.”

Other indicators in the SME survey also saw solid gains, forward orders have recovered, capacity utilisation has rebounded and cash flow is at a record high. Today’s survey confirms the broad-based strength of the economic recovery, which has lifted business conditions and confidence for SMEs.

According to Mr Oster: “The strengthening of leading indicators in the survey says that SME business conditions are likely to be supported in the near term. But there’s still a long road ahead in the recovery and we still see a lot of risks on the horizon”.

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.

For more information, please see the NAB SME Business Survey Q4 2020