Australian business confidence has increased by record levels over the quarter, according to the Sensis® Business Index released today.

The quarterly survey began in 1993 and provides the latest snapshot of small (1 - 19 employees) and medium (20 - 199 employees) business activity in Australia. It is based on a sample size of 1,800 small and medium enterprises (SMEs) from metropolitan and regional areas, interviewed between 6 May and 10 June 2009.

Report author Ms Christena Singh said business confidence rallied strongly during the quarter after hitting a record low last quarter.

“The latest data suggests Australia’s economic environment is starting to rebound, with businesses expecting their operations to perform significantly better in the next twelve months.

“However, weak demand continues to have a strong impact on the economic climate and is the main concern for business.

“Currently two per cent of businesses impacted by the economic slowdown are looking at closing down operations because of the economic climate.

“Any impediment to consumer demand is likely to stall this early phase of recovery and put further pressure on businesses that have been experiencing tough times over the last 12 months,” Ms Singh explained.

Business confidence has almost doubled during the quarter, with the indicator up 18 percentage points to 30 per cent. It now sits slightly below the levels recorded 12 months ago.

However, business confidence is only about half the strength it was in August 2007, when the indicator reached 59 per cent.

Overall, small businesses (29 per cent) have a rosier outlook than medium businesses (25 per cent). Confidence is strongest among businesses with between three and four employees (42 per cent), followed by businesses with five to nine employees (36 per cent). Confidence is lowest among businesses with 100 to199 employees.

Sentiment is strongest in the accommodation, cafe and restaurant sector (52 per cent) followed by the health and community services sector (48 per cent) and the cultural, recreational and personal sector (46 per cent).

Businesses in the transport and storage sector (four per cent) are the most worried, followed by the manufacturing sector (16 per cent) and the retail trade sector (18 per cent).

Views about the current state of the economy strengthened during the quarter, the first time since November 2007.

Perceptions about the future state of the economy also grew strongly, making businesses the most optimistic about Australia’s economic direction since November 2007.

In line with improved confidence, businesses experienced stronger trading conditions during the quarter.

Demand for goods and services strengthened during the quarter, with the sales indicator increasing for the first time since August 2007.

“We have seen a strong improvement in demand during the quarter, but it remains negative overall and at historically weak levels.

“However, businesses are expecting conditions to continue to improve during the coming quarter, with sales predicted to be around August 2008 levels,” Ms Singh explained.

Business profitability also improved during the quarter, but is still below the level experienced this time last year and significantly down on the level enjoyed in October 2007.

“Businesses are expecting further improvement in profitability, in both the coming quarter and the year ahead.

“In fact, they have not been so optimistic about the outlook for business profitability since May 2008.”

Businesses continued to shed staff during the quarter, but at a much slower rate.

“We are also expecting to see an improvement in employment in both the short term and for the year ahead,” she said.

Over the quarter, 14 per cent of businesses decreased their workforce size, while 11 per cent increased staff numbers, and 75 per cent made no changes.

Support for the Federal Government’s policies fell during the quarter, with the indicator down three percentage points to negative five per cent.

However, business approval of the federal government’s policies is significantly higher than it was this time last year. The government’s economic stimulus measures are the main reason for support.

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.