Australian SMEs await Budget on investment & hiring

MYOB has released research indicating that the Australian Federal Budget is likely to shape small- and mid-sized businesses' decisions on investment, hiring and expansion. The findings are based on a survey of more than 1,000 Australian SMEs.

Half of those surveyed said the Budget will directly affect their investment and expansion plans, while 26% said they would expand operations if meaningful new measures are introduced. In contrast, 65% said they would be likely to delay investment or hiring if the Budget does not address their main concerns.

The results suggest businesses are closely monitoring policy settings as they contend with weaker revenue growth and persistent cost pressures. Responses were strongest among younger operators, medium-sized businesses and exporters, which MYOB identified as key contributors to growth in the sector.

MYOB Chief Executive Officer Paul Robson said the findings showed how closely SMEs were watching the fiscal statement.

"The Federal Budget is a critical enabler of SME confidence and activity," Robson said.

"Businesses are ready to act, but the direction they take will heavily depend on the policy environment."

Policy priorities

Among the measures businesses said would have the greatest effect, support to ease cost-of-living pressures ranked highest at 53%. Lower company tax rates followed at 36%, while 35% pointed to cutting red tape.

Asked to identify the single measure that would make the biggest immediate difference, respondents put tax relief first. The result adds to long-running calls from business groups for lower operating costs and a simpler compliance burden.

MYOB's wider business monitor also pointed to a cautious outlook for the coming year. Some 67% of SMEs said they expect economic conditions to soften over the next 12 months, suggesting many are planning for stability rather than aggressive growth.

Revenue and profitability indicators were also subdued. Nineteen per cent of SMEs reported revenue growth over the past year, and 20% expect revenue to increase in the year ahead, while most forecast broadly stable trading conditions.

Cost pressures

Higher operating costs remain a central concern. Fuel was cited by 51% of respondents as a leading pressure point, followed by utilities at 44% and interest rates at 37%.

Businesses reported average cost increases of about 18% over the past 12 months. That helps explain why many are looking for government measures that both support consumer demand and reduce costs within their own operations.

Robson said household budgets and business conditions were closely linked.

"SMEs are adaptable and forward-looking, but easing cost-of-living pressures is critical to lift consumer spending and support a sector that is significantly impacted by discretionary spending," he said.

"The right settings can make a meaningful difference. The MYOB Bi-Annual Business Monitor points to a sector that is ready to move, whether to invest and grow or to consolidate, depending on what is delivered in the Federal Budget."

The report suggests the picture is not uniformly weak. Many SMEs said performance had remained steady, supported by ongoing demand and sales pipelines that have held up despite broader economic uncertainty.

Confidence was notably stronger among some business groups. Younger operators stood out, with 34% expecting economic improvement. Start-ups, exporters and medium-sized businesses also recorded higher levels of optimism, at 20%, 25% and 27% respectively.

Sector split

Conditions also varied sharply by industry and location. Manufacturing, wholesale, finance and insurance showed stronger growth prospects in the survey, while retail, hospitality and agribusiness faced tougher trading conditions.

Regional businesses were under greater pressure than metropolitan firms, adding another layer of unevenness to the operating environment. The data indicate that broad national settings may affect businesses differently across locations and markets.

Robson said the softer revenue environment increased the importance of the Budget for smaller businesses.

"These markers make this Budget all the more important, with SMEs operating in a softer revenue environment and limited profitability growth underscoring the need for measures that support confidence, investment and recovery," he said.