The Index, which reflects the views of 1,000 small and medium businesses from across Australia, also revealed that despite a tough quarter for the Government the long term projections for the economy have improved to their best level in 2 ½ years.

Support for the Federal Government among small and medium businesses (SMBs) has fallen into negative territory and to the lowest level since Malcolm Turnbull took over as Prime Minister, according to the latest Sensis Business Index (SBI) survey.

The net balance fell four points this quarter (+2 to -2). This score is calculated by comparing the number of SMBs that feel supported by the Federal Government’s policies (14%) to the number that do not feel supported (16%).

Sensis Chief Executive Officer, John Allan said: “After Malcolm Turnbull took over as Prime Minister in 2015 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 20 points lower than the highest score we saw under Tony Abbott, following the pro-business Federal budget of 2015. To find a lower score we need to go back to the March 2015 survey, which was taken after Tony Abbott had survived a leadership spill.

“While perceptions of the economy remain strong, less than one in seven businesses 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,” he said.

The Index, which reflects the views of 1,000 small and medium businesses from across Australia, also revealed that despite a tough quarter for the Government the long term projections for the economy have improved to their best level in 2 ½ years.

“Perceptions of the current state of the economy fell slightly, but when we look further ahead businesses are feeling the most optimistic they have been since the carbon tax was repealed in 2014,” said Mr Allan.

The net balance score for current perceptions of the economy now sits at +2, while the expectation for the economy in a year’s time have risen to +10.

“When we look at the key indicators, sales, employment, wages and prices are all positive, while profitability has also improved, despite still recording a negative score. When you mix these results with the fact that business confidence remains at one of the best levels we’ve seen in the past seven years, it’s not surprising to see the long term economic sentiment improve,” said Mr Allan.

“Businesses are expecting a solid increase in prices this quarter, which may give inflation a push, helping the Reserve Bank to justify a rate hike at a time when everyone is keenly watching their every move.”

In terms of business confidence there was a two point fall nationally, with the score now sitting on +44, which is 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.

“The results were fairly flat this quarter, although the ACT saw an 18 point spike and now sits in top spot – driven by strong sales results – in the first full survey taken since the ACT election,” said Mr Allan.

“In a sign of what was to come, the WA Government’s score fell as it headed towards the election loss, with SMBs reporting concerns the Government was too focussed on the interests of big business.”

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.

Comparing metro and regional results, there was little change this quarter, with metropolitan businesses again more confident, now by a slightly reduced margin of seven points (+47 vs +40).

“Overall more businesses in the capital cities are feeling confident and it comes down to their perceptions of the economy. They believe the economy is travelling well, whereas more regional business owners feel pessimistic,” said Mr Allan.

SMB confidence by state