In a mixed economic environment, some businesses continue to grow and invest while others are experiencing harder times.

Download the Sensis Business Index - December 2014

SMEs comprise 99% of all businesses operating in Australia, so their experiences and outlook is a true window into the health of the economy.

The report shows the SME mood has become somewhat subdued. Meanwhile, 2015 is shaping up to be a year that sees a patchy economic recovery with much variation across all states and between metro and regional areas.

In a mixed economic environment, some businesses continue to grow and invest while others are experiencing harder times. The latest SBI paints a picture of stuttering confidence levels with limited movement on the key indicators tracked by Sensis.

The SBI, based on the views of 1,000 small and medium businesses, revealed 51% of small business owners are feeling confident about the year ahead, down from 53% in October. The main drivers of confidence include experience, a solid reputation and strong marketing mix.

Fortunately, only a quarter are worried about their prospects for the year ahead with subdued consumer spending and sales the major causes of concern. Much of this is reflected in concerns about the overall economy. Our research revealed an increase in the proportion of SMEs expecting the economy to be worse a year from now.

No doubt global issues such as the dramatic drop in both the oil price and the demand for commodities, the Russian currency crises and trade sanctions and recent acts of terror continue to play a big picture role in SMEs decisions and concerns.

This does not mean all SMEs are experiencing the same things. Much depends on the local factors driving the indicators we track - sales, profitability, wages, prices, investment and employment. Location also plays a big part, with regional SMEs experiencing harder times overall compared to their urban colleagues.

In a state by state comparison our research indicates the multispeed economy is alive and well; confidence for the year ahead is split across the country. The outlook for 2015 dropped in NSW and Queensland as well as the Northern Territory and ACT. Elsewhere, Victoria and Tasmania saw big leaps in confidence while Western Australia and South Australia also experienced a rise.

The picture is also varied across industries. Confidence in the finance and insurance sector, business services, transport and storage, as well as health and community services sectors is strong. The manufacturing sector continues its trend of having the lowest confidence levels as did retail and construction.

Encouragingly then, there are plenty of pockets of optimism across the country as we begin 2015. I hope you find this quarter’s report useful and thought-provoking.

John Allan, Chief Executive Officer, Sensis

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