Small businesses are more optimistic about Australia’s economic direction than they have been in more than a decade, 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) enterprise business activity in Australia. The results are based on a sample size of 1,800 small and medium businesses from metropolitan and regional areas, interviewed between 18 August and 4 September 2009.

Report author Ms Christena Singh said expectations about the future state of the economy grew strongly during the quarter, as did business confidence and business performance.

“The good news is that we have seen strong improvement in results across most business indicators this quarter, making it two consecutive quarters of growth.

“Last quarter, we saw tentative signs that the landscape was improving for Australia’s small businesses, after record lows experienced in February 2009.

“We are now seeing two very strong quarters of improvement. However, improvements in confidence and expectations have been stronger than the improvements in actual performance, so there are still risks to the sustainability of the current economic recovery.

“Businesses are also expecting their operations to perform significantly better in the next twelve months,” Ms Singh explained.

Business confidence increased by record levels over the quarter and is now at the strongest level since August 2007.

An expectation that business and economic conditions would improve is the main reason for the improvement in business confidence this quarter. A decrease in business is the main reason for being worried.

Ms Singh said there had been a significant reduction in the proportion of small businesses currently impacted by the economic slowdown.

Demand for goods and services strengthened for the second quarter in a row, with the sales indicator the highest since February 2008. However, the indicator is coming from a low base, which persisted through most of 2008 and this year.

“Small business sales expectations for the future are nearly as strong as those in August 2007, when they peaked before the economic downturn hit,” she noted.

Business profitability also improved again this quarter. “Profitability is considerably stronger than this time last year. However, we are still seeing more small businesses with falling profitability than with increasing profitability.

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

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

However, businesses continued to shed staff during the quarter, and at a stronger rate than the previous quarter.

“We had seen some improvement in employment coming from the small business sector last quarter. Unfortunately, this quarter has reversed almost all of that growth.”

In line with improved confidence and performance data, small businesses are expecting strong growth in employment in both the short term and for the year ahead.

Support for the Federal Government’s policies rose considerably during the quarter, taking it to the strongest level for the Rudd Government.

Sensis® Business Index Key Indicators:

• The business confidence indicator jumped 20 percentage points to 50 per cent
• Thirteen per cent of small businesses said they were currently impacted by the economic conditions, down from 36 per cent last quarter
• Expectations about the economy a year from now improved strongly, with the indicator up from negative six to positive 38 per cent
• There was a turnaround in views about the current state of the economy, with the indicator rising from negative 56 per cent to positive six per cent
• Over the quarter, 15 per cent of businesses decreased their workforce size, while 10 per cent increased staff numbers, and 75 per cent made no changes
• The profitability indicator bounced from negative 17 per cent to negative six per cent
• Support for the Federal Government’s policies rose strongly, with the indicator up from negative five per cent to positive six per cent
• Demand for goods and services grew, with the sales indicator improving from negative 14 to zero per cent.

For interviews with the report author or for further information contact:

De-Arne Carr on 03 9397 5677 or 0419 585 711

For further commentary from report author Christena Singh, visit www.speakingsensis.com.au to read Christena’s blog or view the short video blog. The Sensis® Business Index is available now by contacting the above or can be downloaded from www.about.sensis.com.au/small_business/sbi.php from 9am Thursday 17 September 2009.

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.