Growth Customer Experience Productivity Business IQ Trends Success Stories Tech Solutions Subscribe Tech Enquiry

Small business outlook: The quarter ahead

Leon Gettler
Business Journalist

Leon Gettler is an independent journalist, author and public speaker

Leon Gettler
Business Journalist

Leon Gettler is an independent journalist, author and public speaker

The Aussie economy can have a huge difference to how small businesses run. Leon Gettler looks at what it holds for the first quarter of the new financial year.

The most recent Federal Budget looks like good news for small businesses – delivering positive changes to depreciation of assets, lowering barriers to entry for business and reducing taxes – which is expected to boost confidence in the economy as a whole.

But the first quarter of the financial year looks to be challenging for small businesses, driven in part to a lack of consumer confidence while the changes take effect. The main driver behind this, according to some analysts, is an economy that isn’t doing badly, but it’s not seeing huge growth, either.

Man standing on steel grate

A mindset

The outlook for small business in the months ahead will depend on confidence. Former Labor advisor and economist, Stephen Koukoulas, says that at the moment it’s not there, which is restricting small business.  And as long as confidence remains subdued, small business will struggle. When confidence is down, people don’t spend. 

“It’s confidence,” Koukoulas says. “Interest rates aren’t being a constraint.

“If we had interest rates high, we could say it was interest rates. If the world economy was going to hell, you could blame it on that, but the world economy is actually okay. The dollar is down from 80 cents, so even those firms that were competing with cheap imports [are more competitive].

“There are some things that should be helping the business sector not hindering them, and they’re not.”

An economy in the middle

Koukoulas says the signs all point to a lack of confidence because the economy overall is sitting in a middle position.

“With employment being subdued and wages growth being low, people just don’t have the disposable income to spend,” he says.

“That said, there is the benefit of very low interest rates helping them with their cash flow position so in a sense there is nothing disastrous.

“It’s just this scenario where rates are low, they will stay low for a long time. There is no prospect of a rate hike in the next year or two, you wouldn’t think.”

From that viewpoint, it’s a positive environment for business. Low interest rates are a definite boost for bottom lines.

Industries are seeing different things

Looking purely at the figures, the Australian economy is seeing mixed results.

While sagging prices for iron ore and coal exports dragged down Australia’s deficit in March by 18 per cent to $1.32 billion, building approvals hit a record high in March. Australian Bureau of Statistics data shows the surge in the number of buildings approved skyrocketing to a seasonally adjusted 2.8 per cent to 19,419 in March, eclipsing January's previous high-water mark of 19,282 approvals. 

And retail figures rose 0.7 per cent in February, responding to the Reserve Bank of Australia’s rate cut. The latest rate cut in May giving consumers more in their pocket is expected to produce improved retail figures.

A different state experience

At a national level, different states are also experiencing different economic climates, which makes macroeconomic predictions for small business difficult.

“There are differences occurring now because WA is being hit with the mining downturn and to some extent Queensland is too, whereas NSW is doing pretty well… People are feeling rich because their houses are going up in value,” says Koukoulas.

“There are all these geographic differences for small business.

“The small business sector involved in housing and construction is doing ok. The multispeed or patchwork economy has switched from a mining focus to now being [a] construction focus.

“I don’t think we are heading for a recession, but nor are we yet at the stage where there is much positivity and feeling that the economy is humming along and picking up the business sector.”

Look to Canberra

A lack of consumer confidence means one thing: There is a limit to what the Reserve Bank of Australia can actually do. Strong leadership from Canberra, he says, is the only way confidence can be restored.

“They need some policy certainty and more realistic talking about the budget deficit.

“Why are firms holding back on their activity? They’re just not confident. This has been evident from both sides of politics, there’s been a lack of real commitment on economic policy, that’s been a real problem."

However, the 2015 Federal Budget, with its focus on small business, is a definite plus. Not surprisingly the latest NAB Business Expectations Index increased from three points to seven in May, the highest level since last August. 

Get a more regular dose of money smarts with the Smarter Business Ideas newsletter.
Sign up here

Violet Roumeliotis, 2017 Telstra Business Woman of the Year.
Success Stories
Success Stories
Business Woman of the Year helps families find their feet

Violet Roumeliotis, Telstra Australian Business Woman of the Year 2017, shares her experiences as a migrant and woman helping to improve people's lives. As told to Stuart Ridle...

Paul Greenberg, founder of online retailer network NORA, speaking at an event.
Trends
Paul Greenberg on e-commerce: Customers want a personalised experience

Paul Greenberg, founder of online retailer network NORA, is something of a pioneer in Australian e-commerce. After 35 years in the wider industry, he says success still comes b...

Image shows a worker using an e-commerce platform in a warehouse to fulfill orders.
Tech Solutions
Tech Solutions
How to choose the best integrated e-commerce platform

If there's one constant of e-commerce it's change. Success in the digital world requires an e-commerce platform that can adapt with your e-commerce strategy so that change does...

Dietitian and exercise physiologist, Kate Save accepts the 2018 Telstra Victorian Business of the Year Award for healthy eating disruptor Be Fit Food.
Success Stories
Success Stories
Be Fit Food tastes success at the 2018 Telstra Victorian Business Awards

Science with more than a pinch of flavour are the ingredients behind the rapid growth of Be Fit Food, the 2018 Telstra Victorian Business of the Year. The business’ recipe for...