Australia’s economic climate may have levelled off, with the first encouraging, albeit tentative, signs emerging from the small business sector, according to the Sensis® Business Index released today.

The survey provides the latest snapshot of small and medium enterprise (up to 199 employees) activity in Australia, with 1,800 businesses from metropolitan and regional areas interviewed between 2 February and 24 February 2009.

Report author Ms Christena Singh said Australia’s economic landscape was showing some signs of stabilisation after 12 months of rapidly declining conditions.

“Trading conditions and business confidence remain at record lows for Australia’s small businesses. However, we are seeing the first signs that the economy may have stemmed the massive slide experienced over the last 12 months.

“During the last three months, we have seen the percentage of businesses affected by the economic downturn remain fairly much constant. Most key performance indicators have either declined marginally or remained unchanged, while business confidence has weakened only slightly,” Ms Singh said.

The business confidence indicator has fallen one percentage point over the quarter to 12 per cent, after halving the quarter before. Overall, 33 per cent of small businesses are worried about their business prospects while 45 per cent are confident. Weak consumer demand is the main reason businesses are not confident.

The Sensis® Business Index shows demand for goods and services has fallen marginally during the quarter, with the indicator down one percentage point to reach the lowest level on record.

Ms Singh noted that while weak demand was a key issue for small businesses, only three in ten businesses said they had a dedicated sales force.

Profitability is unchanged from last quarter, equalling the record lows experienced by small businesses in November 2000.

Employment has continued to fall over the last three months. More small businesses have decreased staff numbers than increased, resulting in a contraction in the workforce of six per cent. On the up side, small businesses are anticipating increased hiring in the short term.

“Small business capital expenditure figures are welcome news for the Australian economy, rising marginally from last quarter’s low. Added to this, more businesses are expecting to increase capital expenditure in the short term.

“It is encouraging to see small businesses are responding to the economic downturn by not only reducing costs, but also by advertising more to widen their potential market reach and try to grow their business despite the different trading conditions.”

Small business support for the Federal Government has risen strongly this quarter on the back of its economic stimulus activities. The approval rating indicator has risen 11 percentage points to negative two per cent, showing 21 per cent believe the government’s policies support small business while 23 per cent believe they work against.

Ms Singh concluded that while the most recent data suggested conditions had stabilised, there were still significant risks for the Australian economy.

“Small businesses are continuing to experience falling demand and believe the Australian economy will deteriorate further in the near term.

“This coming quarter will be a defining time for many small businesses.”

Other key findings:

• Northern Territory has the highest level of business confidence, while New South Wales has the lowest.
• Tasmania recorded the largest fall in confidence over the last three months.
• New South Wales has the lowest level of confidence and is the first state or territory to have ever had more businesses worried about their prospects than confident.
• Regional businesses are slightly more confident than those in metropolitan areas.
• Confidence is highest in the health and community services sector and lowest in the retail trade sector.
• The holiday season has given the accommodation, cafes and restaurant sector the strongest sales activity, while the cultural, recreational and personal services sector has recorded the weakest industry performance.
• Profitability is strongest in Tasmania and weakest in New South Wales.
• Fifty per cent of small businesses said they understood the Federal Government’s proposed Carbon Pollution Reduction Scheme. More than 30 per cent said they did not understand how the changed would impact business and 20 per cent said they were not aware of the scheme.

About Sensis

Sensis is Telstra's advertising business and Australia's leading directories information resource, helping Australians find, buy and sell. Sensis delivers innovative and integrated local search and digital marketing solutions via print, online, voice and mobile channels to connect Australians 24 hours a day, seven days a week. Sensis' powerful, multi-channel portfolio provides an unparalleled local information source incorporating the White Pages® and Yellow Pages® directories; the MediaSmart digital advertising business; the Whereis® digital mapping business; the Citysearch® entertainment and lifestyle website; the sensis.com.au search engine; the 1234 operator-assisted, premium voice information service; and the accommodation website gostay.com.au. Sensis is also a partner in some of China's most popular websites including real estate and home furnishings website, SouFun.com; auto websites Autohome.com and Che168.com; and digital devices websites IT168.com and PCPop.com.cn.