Small business gloom sends a warning to the government as the election nears

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Despite business conditions in the SME sector remaining steady since last October, the latest MYOB survey of over 1000 small businesses shows “most SME operators still feel the economic outlook is bleak despite federal election promises of greater support for the sector”.

“42 per cent of SMEs surveyed believe the economy will decline over the next 12 months, and only 24 per cent are optimistic about the country’s economic future,” MYOB said in a statement accompanying the release of the survey.

This is a small reduction on the 45% of businesses expecting the economy to deteriorate last October.

But the persistence of bearishness from one of the most important sectors of the Australian economy in the face of steady business conditions is puzzling, and somewhat troubling in an economic sense.

But it could also be political poison, MYOB CEO Tim Reed said.

“The pessimistic SME sentiment revealed in the MYOB Business Monitor should be a wakeup call for all politicians who care about this vital sector as we approach the federal election,” Reed said. “It reinforces the need for policies that will stimulate the economy and lead to growth.”

Naturally the coalition will argue that’s exactly what they are doing with their policies, including the instant asset purchase write off, but Reed says more needs to be done.

“Despite a range of election initiatives promised to help businesses get ahead, business owners still don’t feel confident that the economy has turned the corner. We had been looking for signs of improvement, but the gloomy sentiment has now been consistent over the past three MYOB Business Monitor surveys,” he said.

Uncertainty is poison in an economy.

So the election, its closeness, and the potential for a rerun of the 2010 hung parliament are clearly weighing on SMEs because businesses reporting expectations of the same or better revenues in the 12 months ahead is a strong 72% of respondents.

But there was a step up in businesses reporting less work in the pipeline for the current quarter from one in five to one in four.

That, according to Reed, “indicates a certain level of trepidation and validates the concern many business owners are showing about a possible downward trend in the Australian economy”.

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