Business Confidence: How is it tracking?

Lower rates, a more competitive dollar and immediate tax write-offs for expenditure up to $20,000 have contributed to business confidence in June remaining reasonably positive.

According to Roy Morgan Research, business confidence increased by 9.6 points in May (up 9.1% to 114.7) and has stayed around this level in June (114.8). While this is the highest level since January 2015 (114.9), it remains below the five-year average of 117.2 and well below the peak of 136.3 in October 2013.

Although business confidence remained steady in June, Roy Morgan Research reports there was some deterioration in the outlook for how businesses feel regarding their own financial position over the next 12 months. On the positive side, more businesses (59%) now think the next 12 months would be a good time to invest in growing their business. This is the highest level since November 2014 and above the five-year average of 56%.

Meanwhile, NAB?s business survey agrees with the positive outlook, saying its index rose from 8 point in June to 10 in July, its highest level since September 2013. NAB speculates an additional reason for this result could be because the non-mining sector is doing better than expected. Interestingly, NAB put a new question to businesses asking about the level of return they require before committing to a new investment. The answer came in at more than 13%, which is extremely high, according to NAB, particularly considering the low rate environment Australia finds itself in. Unsurprisingly, the mining sector bumped up the average, needing a 19% return on capital, followed by communications and construction, while utilities and transport had the lowest hurdles of around 9%.

“Have a Go” – Treasurer

At a recent Small Business Council Summit in Sydney, Federal Treasurer, Joe Hockey, couldn?t hide his enthusiasm for urging Aussies to consider including China in their business plans. By 2030, China and India, he said, would be home to over 2 billion middle-class consumers, opening up a massive opportunity for small business here in Australia.

According to Mr Hockey, these markets are looking for what we can provide: excellent quality healthcare, educational services, quality aged care, architectural services, financial services, building and construction services and more. Already, he enthused, 5,600 Australian small businesses are currently engaged directly in business in China. Another 4,800 are trading with China through Hong Kong, and a further 3,000 have a physical presence in China. The opportunities for reward exist for any business who wants to ?have a go?.

The government started the small business ball rolling back in May when it announced a $5.5 billion package to help small business invest, grow and employ more. The centrepiece of this initiative was the ability to deduct assets of up to $20,000 up until the end of June 2017. Other small business sweeteners included a tax cut for companies and a tax discount for small non-incorporated businesses. All in all, it was a package designed to boost confidence in the small business sector.

It will be interesting to track the take-up of the initiative over time!

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