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Following the RBA’s cash rate decision, Australia’s long-term small business confidence will continue to decline based on research by small business lender Prospa.
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SME business confidence continues steady decline: Prospa
07 August 2024
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Prospa revealed small business confidence is likely to remain low as cost-of-living pressures and high inflation “show no end in sight.”
A survey conducted by RFI Global found that small hospitality and construction businesses are subject to extreme levels of stress and burnout in the current economic climate based on answers from 526 SMEs.
Prospa co-founder and chief revenue officer Beau Bertoli said more needs to be done to help support small businesses that may be struggling.
“Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat,” he said.
“That data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small business resilience.”
Key insights from the report reflected a steady decline in long-term confidence, as only 41 per cent of businesses said they are confident about the future of their business over the next 12 months.
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This was followed by only 32 per cent of small businesses who said they are confident about the next five years and 29 per cent about the next decade.
Bertoli said it can be expected that those 42 per cent of businesses that have shown signs of confidence will drop to 32 per cent in the next five years.
“While short-term small business confidence saw a modest uptick in June, long-term confidence continues to decline,” he said.
“While some businesses, particularly those with high turnover, are managing to find growth opportunities, the overall environment of rising costs, subdued consumer demand and economic uncertainty continue to weigh on small business confidence and sentiment.”
According to the survey, 36 per cent of small businesses expect their business revenue to increase over the next 12 months, while 38 per cent believe it will remain stagnant and 23 per cent think it will decline over the next year.
Businesses with more than $2 million in revenue are likely to increase the debt they owe, as 34 per cent said they will increase their debt or keep it at the same level.
Sixty-six per cent of small businesses with less than $100,000 in revenue said they have no current debt or plans to go into debt.
Bertoli said it was an interesting approach for businesses earning more than $2 million to increase their debt, but businesses not wanting to take on debt is a reflection of their decreased financial health.
“This cautious approach could reflect their limited access to credit or unwillingness to take on debt in an uncertain economic environment.”
Data from Xero also reflected the lack of confidence Australian small businesses are showing.
Xero’s survey consisted of more than 1,000 small business owners and decision makers which highlighted 53 per cent are concerned by current economic activity and 41 per cent are experiencing high business costs.
Some common challenges small business owners can expect to face in 2025 include managing cash flow during lean periods, managing work/life commitments and chasing payments on time.
Bertoli said that based on the influx of data pointing towards the lack of small business confidence, something must be done to support them in their current struggles.
“This data underscores the need for targeted support and policy measures that boost the resilience and sustainability of small businesses, particularly in the most affected industries.”
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