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The first cash rate cut will signify the start of a series of significant improvements in SME conditions, according to the latest NAB Business Pulse.
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SME challenges to be left in ‘rear-view mirror’: NAB
30 October 2024
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The November edition of the NAB Business Pulse highlighted good news for struggling small businesses, with relief predicted to come as soon as February 2025.
The pulse revealed NAB now predicted the Reserve Bank will begin lowering rates in February 2025, a full quarter earlier than expected.
The pulse also forecasted an uptick in GDP growth of 2.2 per cent in 2025 and 2.3 per cent in 2026, after having remained stagnant in 2024 at 1.0 per cent.
NAB senior finance executive Julie Rynski said her message for business owners was to “hold tight, there’s good news around the corner.”
“Together, it bodes well for SMEs that according to NAB’s latest quarterly survey of Australian SMEs, have been bunkering down while waiting for better business conditions to arrive,” Rynski said.
“While Australian SMEs wait for more positive times to arrive, now is the ideal moment to take control of what you can, focus on managing costs where possible and prepare for what the figures below tell us will be a stronger pace of growth in the year ahead.”
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Labour market concerns had also eased, down to 28 per cent from 35 per cent in Q1.
Rynski said this would be a relief to all small businesses that had struggled with attracting and retaining staff over the past few years.
Despite predicted improvements on the horizon, cash flow was, at 38 per cent, outlined as the main concern besides inflation, input costs and profitability continued to hinder SMEs.
According to the pulse, profitability had become more problematic due to the number of SMEs that said it was a key risk for the second straight quarter.
Rynski said small business owners should act now to preserve profitability while labour concerns eased.
“While demand for some goods and services is running hot, businesses need to be proactive in balancing input costs and pricing strategies,” she said.
“NAB Group Economics is projecting the unemployment rate to reach 4.5 per cent by end-2024, and remain there through 2025, although, importantly, employment growth is expected to remain positive.”
However, it was noted that Tasmania, South Australia and Queensland still felt acute labour pressures as they were all measured above the current national average of 28 per cent.
The pulse also emphasised the importance of SMEs considering effective cyber security.
Cyber attacks were a concern for 34 per cent of small businesses in the finance and insurance service sector, Rynski said.
“While the threat of scams and attacks is ever-present, efforts by businesses, banks and other stakeholders can help reduce their impact.”
It was also highlighted that 60 per cent of accommodation and hospitality businesses reported cost challenges with persistent inflationary pressures, followed by 45 per cent of SMEs in health services.
“The cost of doing business is always a challenge, but the divergence reported by SMEs active in different regions and industries demonstrates the complexity in Australia’s economy and current business conditions,” Rynski said.
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