Media releases

Westpac-Melbourne Institute Small Business Index indicates sustained positivity and performance

 

3 June 2014

  • Outlook remains positive with Index rising 3.8 points to 123.9 in second quarter
  • Small businesses are more positive about performance of their industries than they were three months ago
  • 40.1 per cent of small businesses cited the ‘economy’ as the top negative factor affecting performance
  • Falling consumer confidence likely to impact on small business performance over the next quarter.

Australian small businesses retain their optimistic outlook this quarter, with the second Westpac-Melbourne Institute Small Business Index rising 3.8 points to 123.9 in May, from 119.4 in February.

Julie Rynski, Westpac’s General Manager of Small Business, said despite small declines in some of the states, it is positive to see small businesses in Queensland remaining optimistic about their performance across the sector.

“The overall lift in sentiment can be largely attributed to a sharp increase in Queensland, of 22.7 points, which is offset by minor declines in New South Wales, Victoria and Western Australia, which fell by 4.1, 4.1 and 6.0 points respectively,” said Ms Rynski. 

“On a whole, it is encouraging to see small businesses continue to be optimistic with their business outlook and hiring intentions. However, it is not surprising to see a slight decrease of the Index in New South Wales, Victoria and Western Australia, given the number of mining and manufacturing closure announcements across Australia in recent months.”

The Index also revealed that 40.1 per cent (rising from 35.1 per cent last quarter) of small businesses consider the economy to be the top negative factor affecting business performance.

Bill Evans, Westpac Global Head of Economics said the response from small business and consumers following the recent Budget announcement will be critical to the change in sentiment and business activity over the next quarter.

“The Index is showing that macroeconomic conditions are still a major concern for small business, however, there is a continued degree of confidence amongst the sector.

"Even though there was little in the Budget which would affect small business adversely, the concern will be the impact the Budget has on household confidence and subsequently demand. We have seen a 6.8% fall in the Westpac Melbourne Institute Index of Consumer Confidence indicating that households may wind back some spending. That will have a direct impact on small business,” said Mr Evans.

Looking ahead, the Index revealed that small businesses with turnover above $2m were more positive about future activity, with a net balance of 38.7 per cent indicating that they expected business activity to increase in the next three months. Among industry groups, small businesses in Wholesale and Retail trade were the most optimistic about future business activity (net balance of 41.0 per cent).

“Small business is the backbone of our economy, and we must support these businesses to ensure the continued prosperity of our nation. Westpac is committed to supporting small business, and offer the largest banking network to support small business in Australia,” added Ms Rynski.


Key findings

Westpac-Melbourne Institute Small Business Index

  • The Index rose 3.8 points to 123.9 in the second quarter, indicating continued performance and optimism of small business in Australia
  • Queensland improved significantly, rising by 22.7 points
  • Minor declines in New South Wales, Victoria and Western Australia, which fell by 4.1, 4.1 and 6.0 points respectively
  • ‘Customers’ remains the top positive factor affecting small business performance (nominated by 53.4 per cent of small business)
  • 36.2 per cent of small businesses said that they use social media to communicate with customers, with Facebook being the most popular channel.


Notes to editors:

About the Westpac-Melbourne Institute Small Business Index

The May 2014 Westpac-Melbourne Institute Small Business Index was commissioned by Westpac Banking Corporation (WBC) (ABN 33 007 457 141) and conducted by the Melbourne Institute.

The research aims to provide information about the economic health of Australian small businesses.

The report is a quarterly publication based on a representative survey of 300 businesses from all over the country conducted between 25 March and 28 March 2014. Data from this survey provides measures of performance and the factors that have had the greatest positive/negative effects.