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The reduction in interest rates is set to bring “modest relief” to SMEs as they continue to battle constrained demand and financing costs, according to the ASBFEO’s latest Small Business Pulse.
Relief on the horizon for weak SME conditions, says ASBFEO
03 March 2025
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8 minute read
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has unveiled the latest edition of its Small Business Pulse, reflecting a 1.5 per cent decrease over the past 12 months.
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Over the past quarter, conditions for small businesses deteriorated 0.3 per cent as high business input costs and staffing issues continued to weigh on the small business operating environment.
The 0.3 per cent drop marked the tenth consecutive fall, and the business pulse highlighted that the business environment remained well below the long-term average.
Ombudsman Bruce Billson said it had been a prolonged period of tough conditions that are levelling out well below average.
“The Reserve Bank’s decision to lower the cash rate target to 4.1 per cent will provide some relief to small and family businesses as rising input costs and frugal customers have continued to challenge margins, profitability and viability,” he said.
“High business expenses and difficulty finding suitable staff are still weighing on the small business operating environment. Yet enterprising small business people continue to meet these pressures with ingenuity and optimism.”
The pulse reflected persistent concern towards the regulatory requirements as the ASBFEO noted a rise in queries from sole traders on tax and insurance, as well as queries from employing businesses on staff entitlements.
Additionally, business owners were found to be researching for capital investment, including business vehicles and equipment; however, SME owners were also comparing the costs of using personal loans to fund their business and were using personal assets to secure finance.
Billson said research into alternative funding sources such as crowdfunding and venture capital had also increased, mostly noticeable in start-ups and small businesses seeking to invest in sustainability initiatives.
The recovery in discretionary spending shown in the pulse came too late for many small businesses as there was a record number of corporate insolvencies in the hospitality industry over the past 12 months, Billson said.
“Small and family business owners are worried about being paid by their business customers as they face challenging business conditions that have seen high numbers of corporate insolvencies. Our office continues to observe elevated requests for help from distressed business owners who are fearful that another who owes them money has become insolvent.”
“Extended payment times and terms are weighing on small business operating conditions. Payment disputes are an early warning sign of a cash flow problem and can have a ripple effect that threatens the liability of other businesses.”
The recent edition of the business pulse also reflected patchy growth in enquiries about starting a business, which Billson advised was likely to continue.
“Small business needs to be front of mind for our policy makers and regulators.”
“We need to do all we can to shift the mindset from minimising headwinds to maximising ‘wind in the sails’ of our hard-working small and family businesses.”
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