Confidence takes a dive in business poll

Small business confidence stumbled in the June quarter, a National Bank survey has found.

A net 49 per cent of small businesses surveyed expected the economy to deteriorate over the coming 12 months, the worst level seen since the first publication of the National Bank's Small Business Monitor in 2002.

Until now, small businesses had proved more resilient than larger firms, but that divergence was all but eliminated in the latest survey.

Optimism over business conditions also weakened. In the June quarter, a net 8 per cent of SMEs expected business conditions to improve in the coming year. But back in the March quarter, a net 29 per cent had expected that better business conditions would prevail.

National Bank economist Lauren Rosborough believed the fall in optimism was due to SMEs' exposure to the retail, construction and housing sectors - just as SMEs outperformed the nation in growth from 2002 to 2004 because the strength of those sectors had been driving the economy.

"Maybe small businesses are just exposed to them a little bit earlier," she said.

But it was not all bad news for small businesses, Rosborough said.

"Yes we are slowing down but we have done very well and there are a lot of capacity constraints. When you average out the huge growth and the easing we're expecting, you're still looking pretty good - an average of 3 per cent [growth]."

National Bank estimated the annual average growth rate for small businesses was 3.7 per cent to last March, a sturdy performance compared with their 3 per cent average over the past seven years, but one which underperformed 4.2 per cent growth in the wider economy in the year to March.

Small businesses again cited difficulty finding skilled staff as their biggest concern in the June quarter - as it has been for six consecutive quarters. That was followed by regulation and the tax burden.