Sydney Business Confidence Hits Highest Level in More Than 8 Years

Confidence among Sydney’s small and medium businesses has hit its highest level in more than eight years, according to the latest Sensis Business Index (SBI) survey.

The net balance was up four points to +61 this quarter, while a growing divide emerged with regional businesses in NSW dropping 12 points in confidence (down from +49 to +37). Last quarter Sydney businesses reported better results for sales (+9 vs -8) and profitability (+4 vs -8).

Sensis Chief Executive Officer, John Allan said: “Sydney businesses are seeing much better sales and profitability results than their regional counterparts. Meanwhile, regional business owners reported more problems with competitive pressures, gaining access to finance, bad debts and finding the right staff.

“Regional businesses remain pessimistic about the economy, reporting problems with unfavourable government policies. They are also much more negative towards the State Government compared to business owners in Sydney.”

The Index, which reflects the views of 1,000 small and medium businesses from across Australia, also revealed that while the overall business confidence score for NSW was down three points to +51 it remains well above the national average and is the second highest score.

“The latest survey was taken at the time of the change in Premier from Mike Baird to Gladys Berejiklian. Given we know that businesses dislike uncertainty, confidence remains strong, although there is some concern about sales,” said Mr Allan.

Other key findings specific to New South Wales are:

  • SMB support for the policies of the NSW Government was down four points, returning it to negative territory on -2. Despite the negative rating this was the equal second best score for a state or territory government
  • Support for the Federal Government was down one point and is now neutral (0). This score is above the national average of -2
  • Last quarter, performances relating to sales, employment, wages and prices were positive but only improved for prices. The profitability balance fell to a neutral level
  • Key indicator expectations for the current quarter remained positive and were higher for sales, prices and profitability, with unchanged balances for employment and wages.

Nationally, support for the Federal Government among SMBs has fallen into negative territory, down four points
to -2, which is the lowest score since Malcolm Turnbull became Prime Minister.

“After Malcolm Turnbull became Prime Minister we saw confidence in the Government rise, with businesses telling us they were optimistic about the change. Since then the Government’s approval rating has fallen nine points and is now in negative territory for the first time since March 2015,” said Mr Allan.

“Less than one in seven businesses now have faith in the Government’s policies, with the biggest concerns being excessive bureaucracy and red tape, as well as there being too much of a focus on the interests of big business.”

While current perceptions of the economy were down one point to +2, the long term projections for the economy have improved to their best level in 2 ½ years, up two points to +10.

“Business owners are feeling the most optimistic they’ve been about the prospects for the economy since the carbon tax was repealed in 2014. Business confidence also remains at one of the best levels we’ve seen in the past seven years,” said Mr Allan.

In terms of business confidence there was a two point fall nationally, with the score now sitting on +44, which is still the second best result since March 2010.

Across the states and territories only ACT, Tasmanian, Queensland and NT businesses became more confident, while WA businesses maintained their score, and the other state and territories went backwards.

At an industry level there were mixed results in terms of business confidence, with seven out of 10 industries going backwards this quarter. The three sectors that improved were Health and Community Services; Building and Construction; and Retail Trade.

“We saw big declines in confidence in the manufacturing and hospitality sectors this quarter, driven by poor sales results, with manufacturing really struggling compared to the other industries. Fortunately, expectations are for an improvement in sales this quarter,” said Mr Allan.