Sentiment for the quarter was heavily impacted by a sharp 12 per cent drop in the Current Conditions Index, which outweighed the Future Conditions Index which rose by 4 per cent.
The deterioration has had a direct impact on bottom lines with 40 per cent of SMEs reporting a decline in profits over the past 12 months. Pressure is expected to continue with two thirds of SMEs forecasting revenue to be unchanged or lower over the next year.
A downturn in dwelling construction means SMEs in related sectors have reported a significant deterioration in conditions.
The Construction, Financial and Real Estate Services sectors reported the biggest sentiment declines this quarter with falls of 30 and 21 per cent respectively.
A downturn in dwelling construction means SMEs in related sectors have reported a significant deterioration in conditions.
The Construction, Financial and Real Estate Services sectors reported the biggest sentiment declines this quarter with falls of 30 and 21 per cent respectively.
SMEs in these sectors are also more downbeat about the outlook with 75-80 per cent expecting revenue to be the same or worse over the next year.
Westpac Senior Economist, Matthew Hassan, said: “The housing cycle has turned and is clearly starting to bear down more heavily on exposed SMEs. Meanwhile much of the wider SME sector continues to face intense pressure on profitability. This is most evident in retail where SMEs see significant declines in profit despite a modest lift in sales. The results suggest they are struggling to adapt to intense competition, new entrants, market ‘disruptors’ leveraging new technologies, red tape and regulation and energy costs.”
The Index found specific sectors, including those that have been facing declines are seeing an increase in activity and sales.
Over half of customers have taken steps to future-proof their business, with many investing in strategy and planning (57 per cent), implementing operational efficiencies to boost productivity (57 per cent) and training up staff (55 per cent).
Westpac Senior Economist, Matthew Hassan, said: “The housing cycle has turned and is clearly starting to bear down more heavily on exposed SMEs. Meanwhile much of the wider SME sector continues to face intense pressure on profitability. This is most evident in retail where SMEs see significant declines in profit despite a modest lift in sales. The results suggest they are struggling to adapt to intense competition, new entrants, market ‘disruptors’ leveraging new technologies, red tape and regulation and energy costs.”
The Index found specific sectors, including those that have been facing declines are seeing an increase in activity and sales.
Over half of customers have taken steps to future-proof their business, with many investing in strategy and planning (57 per cent), implementing operational efficiencies to boost productivity (57 per cent) and training up staff (55 per cent).
