Australia's small business sector is punching on gamely

The Calcio Storico, a mix between football, rugby and wrestling, in Florence. Matej Divizna/Getty Images

If you were going to say anything about Australia’s small business sector, you would have to say that it is tough.

Faced with an economy that naturally seems to support duopoly and oligopoly industries, the small business sector keeps battling on.

And because small business is where a lot of Australians work, the health and outlook for the sector is of vital importance to the health of the overall economy.

Equally important is that the health and outlook of the sector impacts on those Australian who not only run, but work in those small businesses. It drives how these folks see the economy, their job security, the outlook for the future.

That in turn impacts on their spending intentions and habits which ultimately come full circle, driving the business conditions and confidence across the domestic economy.

So the good news for the domestic outlook is that Australia’s small business sector remains solid according to the latest quarterly SME iteration of the NAB’s business survey.

NAB chief economist Alan Oster said that while there had been a loss of momentum from Q2’s strong surge, the bank’s SME survey showed that “overall, conditions and confidence remain above their long-term averages which suggest relatively solid levels of underlying activity”.

He added that the SME survey showed that “the pace of growth is now more consistent across small and large businesses”.

Certainly trading and profitability were lower than the previous survey while employment was the same at -1. But on balance these metrics were looking better than at the same time a year ago when the Q3 2015 survey was undertaken.

But there are large variations for small business outcomes across the states which once again highlight the divergent economic conditions and outcomes between New South Wales, Victoria and the rest of the states. Strangely though, given business conditions, Queensland businesses have the equal highest confidence in the nation, on par with NSW and Victoria.

NAB’s Oster said the “ongoing mining downturn continues to weigh on WA conditions, while the recent improvements in commodity prices have done little to assuage the pessimism of SMEs from the state, with WA continuing to be the least confident state as well”.

“Apart from WA, SA was the only other state to report negative confidence.”

One thing worth noting though was the “number of SME sectors which reported positive business conditions fell in the quarter”, Oster said. Those reporting negative conditions now include “transport, retail, manufacturing and accommodation, [and] cafes & restaurants”.

It’s only mildly negative but cafes, restaurants, and takeaway is a sector in retail sales I often use to gauge the health of consumers and attitude toward discretionary consumption. So that’s something worth watching.

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