Australian small business owners are feeling more confident in the wake of the federal election, but are concerned about the prospects for the economy over the next 12 months as company defaults spike.
As talks of a possible recession swirl in the United States and Australia’s central bank continues its struggle to lift inflation, 84% of business owners feel Australia’s economy is either effectively at a standstill or is about to slow down, according to Sensis’ August business index, released today.
The findings, drawn from a survey of about 1,000 SME owners in late-July, reveal worries about the economy aren’t necessarily tempering confidence though, with one-in-two respondents confident in their prospects despite economic worries.
But that go-get-em attitude isn’t shared by everyone, with the survey finding one-in-five businesses in the hospitality and retail sectors are “fairly or extremely worried” about the coming 12 months.
Conditions have been particularly tough in both the retail and hospitality sectors as of late, with economic headwinds combining with broader market disruption to spell disaster for many businesses.
Ongoing difficulty accessing finance, an increase in the price of goods for 36% of respondents and ongoing gripes about “excessive red tape” were cited as impediments by respondents to the August index.
Cashflow stress as dollar dives
Leigh Rust, founder and general manager of manufacturing business Safety Line Jalousie, says his biggest concern for the future is the Australian dollar, which has been weakening for some time.
“In manufacturing, a lot of product still comes in from overseas, which is heavily reliant on the US dollar,” he tells SmartCompany.
“It’s putting stress on cashflow and the growth of the company.”
The Australian dollar currently at decade-low levels against the American greenback, down to 0.68 cents on Monday morning, a trend also affecting purchases of American software.
Rust says he managed to stockpile some product before the dollar dropped lower again recently, but remains worried about the medium-to-long term, particularly amid the trade war between China and the United States.
“It puts doubt in the back of your mind. You’re trying to grow and expand, you want to bring more product in, but with the exchange rate the way it is, it makes it hard.”
“At the moment, we’re just riding the wave hoping it stabilises,” Rust says.
Nathan Schokker, owner of facilities management business Talio, says he’s experiencing a “two-paced” economy at the moment, with some clients a little sheepish, although he believes there are still opportunities.
“We can see a number of our clients hold back on making decisions and/or spending money which flows on to us,” he tells SmartCompany.
“Although that does present an opportunity where we are seeing a number of businesses and business people lean back towards building relationships in business to put them in better stead if and when the economy slows off or hits a bump.”
Government support falling flat?
An expansion of the instant asset write-off, $2.1 billion in funding commitments for improving access to finance for SMEs and efforts to improve dispute resolution for small business have been billed as cornerstones of the Coalition’s SME agenda.
However, the Sensis’ index, continuing to track a growing perception among business owners that federal government policy isn’t hitting the mark, found more than a third believe those policies are having “no impact”.
A further 22.9% said government policies are actually “working against” small business, while just over 21% said their policies were supportive.
“Over the years, we have seen a growing perception among SMBs that Federal Government policies do not affect them and our latest index further cements this,” Sensis chief executive John Allan said in a statement circulated Monday.
Steve Molloy, owner of app development company LOMAH Studios, says the government could be doing “much more” to support innovative companies and products.
“Governments could do much more to promote innovation incentives for startups and companies under 100 staff in new industries and products,” he tells SmartCompany.
“Changes to encryption laws with tech companies in Australia, R&D grants becoming harder to obtain and the political mobilisation of the tech sector have all contributed to a noticeable change in the last three years.”
Company defaults spike
Meanwhile, a separate analysis of ASIC insolvency data for the June quarter published by credit giant Equifax on Monday has tracked a 15% spike in company administrations.
The worrying findings bring annual growth of company defaults to 5% year-on-year, with the construction and healthcare sectors struggling in particular.
Equifax says a deterioration in trading conditions and firm profitability is behind the spike, with defaults up 8% year-on-year in NSW and Victoria.
There was, however, some positive news for the retail sector, with defaults actually decreasing for the sector in the June quarter, down 1% year-on-year.
“While retail is doing it tough and the overall retail environment remains subdued, five of the six retail trade categories experienced small improvements in turnover for the June quarter,’’ Equifax’s Brad Walters said in a statement circulated Monday.