Business confidence for SMEs rebounded in the September quarter, though remained below-average levels, according to the National Australia Bank quarterly SME survey.

The overall level of SME confidence was consistent with levels reported by larger businesses in the NAB quarterly business survey. This is the first time in two years that smaller firms have been as confident as larger firms.

According to NAB, part of the improvement in sentiment may reflect expectations for further interest rate cuts (survey taken prior to RBA lowering the cash rate by 25 bps at its meeting in October), while announcements of additional policy stimulus by major central banks (US, Europe and Japan) may have helped.

SME business conditions also strengthened in the September quarter, following a very weak outcome in the previous quarter, though smaller firms continued to under perform their larger counterparts.

SME conditions were strongest in health services (+16), while they were weakest in wholesale (-16), retail (-14) and construction (-12) – with these industries also under performing their larger counterparts. Conditions picked up considerably in all states, with the exception of Queensland, where they deteriorated modestly.