Despite a degree of economic stability in Australia compared with elsewhere in the world, a lack of confidence and cost containment issues are threatening to blind local SMEs to future opportunities.
According to the fourth annual PKF Business & Population Monitor, local SMEs are essentially, once bitten, twice shy thanks to the GFC, as concerns about global economic instability is stifling much-needed investment in Australia.
PKF national director of enterprise advisers Matt Field told Dynamic Business there are a number of reasons for the significant drop in confidence, saying most SMEs have never fully recovered from the GFC in 2009.
“They’ve seen it all before, they’ve heard the messages and they’ve felt the pain, so their confidence levels have never really returned from what they were before,” he said.
According to Field, there are both local and global factors contributing to adverse feelings felt by business owners. Locally, interest rate uncertainty is causing scepticism and some businesses are struggling to find new a form of stimulus to replace previous government funding grants. On a global scale, Field believes the European debt crisis is causing cautiousness.
However, he does expect the minerals boom will continue to spread through other sections of the national economy and a steady stream of demand will return to a number of industry sectors. SMEs who fail to increase investment as a result of this will miss out on fully capitalising on the expanded opportunities.
“In between Australia’s booming minerals sector and struggling trade-exposed industries sits the ‘middle sector’”, Field said, a sector which will neither benefit directly from the minerals boom, nor face the challenges of the high exchange rate and weakened demand from advanced economies.
‘They’re in a holding pattern, they are still suffering from economic nervousness and cautious optimism but they are not receiving any stimulus from the government and last budget didn’t really have any long term incentives for these middle businesses,” he added.
Accounting for just over half of the entire Australian economy, businesses in this section are receiving very little attention. These include: commercial and industrial property, housing, and a range of household services, business services and sectors servicing generalised business investment.
According to Field, the middle sector is relatively OK though, thanks to the support of construction, engineering and health, who all fall in this range.
He suggests the likely rise in household spending and residential investment driven by the minerals boom means SMEs must get moving and make investment and employment decisions now, in preparation for the increased demand.