Small business profitability is at a record low in Australia, according to the Sensis business index.
Report author Christena Singh said profitability amongst Australian small businesses fell sharply during the quarter and businesses were expecting further falls over the next 12 months.
“The profitability indicator is now strongly negative, and this is the weakest profitability result we’ve seen in the 18-year history of the report,” she said.
Half of small businesses experienced a decrease in profitability during the quarter, while just two in 10 experienced an increase.
“While there are marked differences across the nation, all states and territories recorded negative profitability indicators this quarter,” Singh said.
“Some sectors have performed better than others, but profitability has generally been weak across all industries.”
The retail sector again experienced the weakest profitability during the quarter. For the coming quarter, profitability is also expected to be lowest in the manufacturing and the building and construction sectors.
Along with profitability, the report shows all performance measures deteriorated during the quarter.
The indicators for sales, profitability and capital expenditure are now strongly negative, while wages and prices remain in positive territory, and employment is flat.
“Not surprisingly, business confidence has been dented, with the indicator almost halving during the quarter. Small business perceptions about the economy have also become more pessimistic,” Singh said.
“However, Australian small businesses are resilient and very nimble, with many taking proactive measures to counteract the changing conditions experienced during the last six months.”
According to the report, 42 per cent of small businesses are planning to introduce new products and services during this financial year, while 38 per cent expect to increase their digital presence, and 35 per cent look to increase their sale force.
“In the face of rapid technological and economic change, there has been an upswing in businesses looking to increase their digital presence and social media activity over the last six months,” Singh said.
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