Business split on economic outlook predictions: MYOB

OVER three quarters of Australian SMEs anticipate the same or greater sales/work in the pipeline for the November 2015 to January 2016 quarter, according to the latest MYOB Business Monitor.

Some 41 per cent of operators felt they had the same amount coming in and a further 38 per cent had more in the pipeline. Only 19 per cent felt they would have less coming in during this quarter.

Exporters (53 per cent), importers (46 per cent) and retail and hospitality businesses (48 per cent) were the top scorers when it came to the short term pipeline.

The MYOB Business Monitor, now in its sixth year, is a bi-annual national survey of over 1,000 SME business owners. The results were consistent with the preceding Business Monitor research, conducted in March 2015.
MYOB CEO Tim Reed said while the short term outlook was solid, the results indicated that SMEs were pessimistic about the Australian economy over the next 12 months.

"We found that 45 per cent of SMEs expected the economy to decline and only 23 per cent expected it to improve. Not surprisingly, those who had experienced increased revenue in the preceding 12 months were more optimistic, with 46 per cent expecting an improvement. 

"This sentiment about the overall economy flowed through to a less optimistic outlook for expected medium term revenue compared to six months ago. While two in five operators thought their revenue would remain the same over the next 12 months, the proportion expecting revenue to decline or increase were similar at 27 per cent and 28 per cent respectively," said Mr. Reed.

Sentiment on FTAs, AUD and sharemarket volatility

Business owners were also asked what impact three specific matters would have on the cost of doing business and consumer confidence - the weak Australian dollar, sharemarket volatility and the free trade agreements (FTAs) with Japan, China and Korea.   In terms of the cost of doing business, the majority felt these three issues would have no impact at 54 per cent, 63 per cent and 59 per cent respectively.

"We know the Federal Government and industry bodies have placed great emphasis on the benefit of the free trade agreements to the SME sector and past evidence suggest they will boost economic growth. These results call for more work to be done to show SMEs the opportunities they will bring," Mr. Reed said.

"Of those SMEs who did think it would have an impact it was evident that certain sectors have already caught on to the wealth of opportunity for them in Asia, with the free trade agreements more likely to be rated positively by manufacturing and wholesale businesses (36 per cent) and retail and hospitality businesses (29 per cent)."

Top pressure points for SMEs

The MYOB Business Monitor also examines what's tough for SMEs. In this survey, the top five pressure points varied only slightly from the previous Business Monitor:

1. Attracting new customers:
Winning new customers was a greater pressure for SMEs who reported a revenue fall in the previous 12 months (35 per cent); operators with a social media site (32 per cent) or website (30%); and retail and hospitality businesses (32 per cent)
2.  Competitive activity:
Those most likely to name this pressure point were those in manufacturing and wholesale (44 per cent); retail and hospitality businesses (34 per cent); and operators who reported a revenue fall in the previous 12 months (35 per cent)
2.   Fuel prices:
Those most concerned about fuel prices were in agribusiness (38 per cent) and construction and trades (32 per cent); as well as operators who reported a revenue fall in the previous 12 months (33%)
4. Cash flow: 
The SMEs most feeling the cash flow pinch were those who reported a revenue fall in the previous 12 months (37 per cent); manufacturing and wholesale (33 per cent) and retail and hospitality businesses (29 per cent)
5. Profitability and price margins: 
Keeping the keenest eye were manufacturing and wholesale (40 per cent); operators who reported a revenue fall in the previous 12 months (34 per cent); and retail and hospitality businesses (32 per cent).

Key areas for focus by SMEs

Mr. Reed added that there were five areas of business in which operators were most likely to increase their focus/investment in the next 12 months:

  • Prices and margins on products/services sold (28 per cent)
  • Customer retention (27 per cent)
  • Number or variety of products or services offered (26 per cent)
  • Customer acquisition (25 per cent)
  • Amount paid to employees (25 per cent)

"While SMEs are cautious about the year to come, they're carefully considering and investing to protect and grow their businesses. These results are also significant in the face of our earlier finding that a quarter of SMEs had taken up the Government's $20,000 instant asset write-off; it looks as others are investing in other areas," Mr. Reed said.

Topics:  economy

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