The nation’s small to medium enterprises have weathered a tough 2012, but remain confident that the nation’s economy is on the right track and will be in an improved position a year from now.

This is the key finding of the Sensis Business Index, which posted the first positive results in the last two years.

The quarterly survey of 1,800 businesses across Australia found that 53 per cent of respondents were confident about their prospects in 2013 and beyond, while only 25 per cent were concerned – representing an 11 per cent bump in confidence.

Victoria recorded the highest level of SME confidence, followed by the ACT, NSW, Western Australia and the Northern Territory. Queensland was the least confident state, followed by Tasmania and South Australia.

In terms of sector confidence the health and community services sector followed by the finance and insurance sector recorded higher levels of confidence while manufacturing the lowest.

“As part of their renewed confidence, SMEs are expecting increases in sales, wages, prices, profitability and capital expenditure in the next year,” said report author Christena Singh. “The strongest profitability expectations across Australia were in NSW, with the cultural, recreational and personal services sector expecting the greatest rise in profitability in the next year.

“However, helping to dampen optimism the proportion of businesses reporting increased sales fell in the last quarter, reversing the previous quarter’s improvement. The result was the weakest sales performance since August 2011.”

Businesses reporting higher levels of confidence attributed it to feeling that they were established and experienced in their business operations and that they had plenty of work in the pipeline. Those reporting lower levels confidence cited lower consumer spending levels, higher costs and overheads as well as the uncertainty until the Federal election.

espite the higher levels of optimism for next year, businesses acknowledged that 2012 had been a very tough year across a number of areas:

  • The net proportion of SMEs that increased prices fell during the last quarter, bringing this down to the lowest level in more than 15 years;
  • Profitability performance was down eight per cent from the previous quarter. Profitability has been net negative overall for almost five years, with the last net positive profitability result recorded in February 2008;
  • Lack of work (or sales) was the highest concern reported, with the proportion of SMEs facing this issue ranging from 31 per cent in South Australia to 14 per cent in the Australian Capital Territory;
  • Nationally 48 per cent reported goods and services prices they had been charged had increased in the last quarter. Of those, 42 per cent said that their suppliers had blamed the carbon price for this increase;
  • About 33 per cent of businesses reported having made changes to their operations as a result of environmental concerns. Those in South Australia were the most likely to report having made ‘green’ changes to their business. Interestingly, confusion over the carbon price rose, with the proportion of respondents saying they “thoroughly understood it” falling by four per cent and a two per cent increase in the proportion that felt they did not understand the legislation at all. Some 15 per cent reported making changes to their business to address the introduction of the carbon price;
  • During the last quarter 19 per cent experienced a rise in total wage costs, while 17 per cent recorded a decline. Those in Tasmania recorded the highest net results in total wage costs (17 per cent), while the lowest wage pressures were recorded in Victoria (negative two per cent);
  • Capital expenditure recorded a fall of seven percentage points last quarter, reversing the previous quarter’s improvement. Falls occurred across all Australian states and territories;
  • In terms of government there was a marginal increase in support for the Federal Government with the Queensland Government registering the most support due to perceptions that it was more supportive of small businesses.
  • Tasmania and the Northern Territory governments registered significantly lower levels of support quarter-on-quarter, with support levels from Territory SMEs falling by 39 per cent. This reverses the post-election boost that the Northern Territory Government received last quarter with SMEs voicing their concerns over increases to utility costs in the Territory. 

The full report can be found here