The NAB Quarterly SME Survey covers conditions in small, medium and emerging businesses (SMEs) across all parts of the non-farm business sector in Australia.

Subdued SME conditions persist and confidence falls further.

Business confidence of SMEs fell heavily in the September quarter, consolidating a sharp decline in the June quarter and consistent with the deterioration in confidence reported by larger businesses in the NAB Quarterly Business Survey. SMEs are generally less optimistic than larger firms about future activity, with heightened volatility in global financial and equity markets, concerns about the resolution of European sovereign debt issues and the relatively high AUD appearing to have had more of an impact on the sentiment of smaller sized firms. SME business conditions were weaker but remained above GFC levels.

Confidence deteriorated very sharply in small transport, business services and health, while it strengthened notably in property and was a little stronger in construction and retail, albeit still poor. Transport sentiment was the weakest of all industries, while confidence was strongest (and positive) in property. Confidence levels were marginally improved in WA – the most optimistic state – but were either weaker or unchanged across all other states. NSW and SA are now the least confident about near-term activity

Wholesale and manufacturing conditions deteriorated sharply in the September quarter, while in contrast, accommodation, cafes & restaurants and business services reported notable improvements in activity. Conditions were strongest in business services, health and finance, and weakest in retail, transport and property services. By state, conditions improved in Queensland, with the apparent flood recovery process gaining some momentum, while conditions deteriorated in all other states, with the most marked falls in WA, NSW and Victoria. Conditions were weakest in WA and SA and strongest (albeit still soft) in Victoria.

Confidence levels deteriorated across all firm sizes, with mid-tier firms (turnover of $3-5m p.a.) now the least pessimistic of all SMEs. Conditions also weakened across all firm sizes, reflecting a general weakening in profitability, employment and trading conditions; in the quarter, conditions were relatively better for mid-tier firms compared to low- ($2-3m p.a.) and high- ($5-10m p.a.) tier firms.

Cash flow remained relatively subdued in the September quarter, and deteriorated very sharply in property services, retail, manufacturing and accommodation, cafes & restaurants, while it strengthened in finance, business services and construction. Cash flows were much stronger in SA and were marginally stronger in NSW, while they weakened in WA and Queensland and were broadly unchanged in Victoria.

Employers’ long-term decisions continue to be constrained by a general lack of demand, while tax & government policy and global economic uncertainty became more of a concern for SMEs in the September quarter.

For further analysis download the full report

• Quarterly SME Survey – September 2011 (311 KB)