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SME Confidence Increases in 2021

Sentiment for 2021 is on the rise as businesses share their thoughts on the road ahead.

According to the last 2020 report of the NAB Business Survey, Australian business owners have increased confidence heading into 2021.  According to the survey, business confidence rose by 5 points during January, to reach 10 index points.

As the implications of lockdowns have faded for the most part, optimism is increasing as businesses return to normal operations within many sectors. In addition to outlook, capacity utilisation increased nationally by 3ppts by the end of Q4 of last year– to be only just below its long run average. Capacity utilisation rose across all industries in late 2020. According to Alan Oster, NAB Group Chief Economist:

“Capacity is our best measure of activity in a levels sense. Conditions and confidence suggest that there is a rapid rebound, but capacity utilisation tells us that we are almost back to the same level of output. At least in an aggregate sense. Further we know from the monthly survey that capacity utilisation continued to improve late in the quarter” said Mr Oster.

Broadly speaking, the economy appears to be recovering well and according to Mr Oster the level of activity may be restored much faster than anyone would have expected. Mining, service, retail and manufacturing are on the up-and-up.  However, other sectors are yet to recover (travel, tourism and entertainment). These sectors have a way to go before making up for lost time and profitability.

Taking a broad snapshot February wages have increased despite low inflation and a low cash rate. While unemployment has risen a little since January (economists believe it is likely to be a seasonal variance), the Australian Dollar remains strong against the US Dollar.

Despite the economic conditions arising from various governments’ policy responses to COVID-19, Australians seem to maintain a positive outlook as they get on with the job of forging ahead in business. We anticipate this growth and optimism to extend into the year, provided the different levels of government continue to explore pandemic management alternatives to locking business and trade.

Optimism goes a long way in tough times, but so does good planning. At UHY Haines Norton we believe developing a strategy to take advantage of opportunities and a plan for worst-case scenarios allows business owners to lead with confidence and still maintain an optimistic approach to business. If you would like to make the most of the opportunities for the coming year, or want to mitigate against uncertainties, please speak with one of our business specialists.

Dean Vane: D.Vane@uhyhnseq.com.au

Malcolm Barkle: M.Barkle@uhyhnseq.com.au

 

Imaged sourced from RBA website: https://www.rba.gov.au/snapshots/economy-indicators-snapshot/

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