Business confidence is increasingly patchy across the nation, led by steep falls in sentiment among Victorian business owners, while Western Australia may be turning a corner.
Despite the well-known downturn being experienced in WA following the end of the mining boom, and the associated impacts this has had on businesses of all sectors, the state showed the highest upturn in confidence in the June quarter of 2017 – soaring by 37.9 per cent, according to the latest quarterly Westpac-Melbourne Institute SME Index.
“This is a surprising and encouraging result. Western Australia has been the state hit hardest by the mining downturn. The rise in confidence over the last quarter could reflect a long awaited improvement in business activity. Although sales, activity, profits and employment are all still reportedly down on a year ago, declines are becoming less widespread than in previous quarters,” said Westpac senior economist Matthew Hassan.
According to the report, the proportion of SMEs in the west that are reporting declines in sales, profits and employment are considerably lower than at the beginning of the year.
It suggests that while trading conditions have been sluggish, they are benefiting significantly from lower overhead costs and taxes – which are rising slower in WA than in any other state.
Meanwhile, SMEs in Victoria are the least optimistic about future operating conditions. Businesses in the state have reported a worsening of conditions in sales volumes and profitability, while access to finance has shown a stark deterioration.
“Evidently, something has rattled SMEs in Victoria with expectations for future conditions markedly weaker than in other states. Victorian SMEs reported markedly weaker reads on sales and profits compared to their peers in the other major eastern states,” Mr Hassan said.
The sectors reporting the most confidence are agriculture, forestry and fishing, professional services as well as wholesale and retail trade, while the construction sector – coming off the peak of the housing construction boom in the eastern states, has reported the greatest dip in confidence going forward.