As we start 2025, the latest NAB Business Survey paints a picture of a resilient Australian economy, though there are some challenges, particularly in certain states and industries.
Here’s the breaks down the Survey for Small Businesses by Ivan Colhoun, CreditorWatch Chief Economist.
The overall business conditions have improved slightly from November to December, signaling stability. However, for many SMEs, the business environment remains less positive compared to the boom years during the COVID-19 pandemic.
State-by-state breakdown
Queensland continues to report the most favorable business conditions, which stands in contrast to lower consumer sentiment in the region. NSW also sees strong results, likely buoyed by key industries like banking, property, and tech. In contrast, Western Australia is showing a concerning dip in business conditions, primarily driven by the struggles of the transport and utilities sectors, potentially linked to rising energy prices and the lower Australian dollar.
Industry highlights
On the industry front, retail businesses have reported the first positive business conditions since late 2023, which is a hopeful sign for SMEs in the retail space. Meanwhile, the transport and utilities sectors have taken a significant hit, largely due to higher energy costs and exchange rate pressures. The mining sector, however, remains strong, maintaining its position as a top performer.
Economic and labor market resilience
Despite some areas of weakness, the broader economy and labor market show signs of resilience. Employment levels and capacity utilization are up, suggesting that businesses are still operating efficiently. However, input costs, including labor and energy, have been rising, and SMEs may feel the pinch from these increasing costs. Retail price growth has been modest, and while inflation pressures have cooled, SMEs should remain cautious as energy prices and global supply chain issues continue to influence input costs.
What SMEs should watch
For SMEs, the key takeaway is that while business conditions have improved slightly, significant challenges remain. It’s important to keep an eye on state-specific trends and adjust business strategies accordingly. The increase in input costs and the slow easing of interest rates also means that businesses may need to reassess pricing strategies and look for ways to manage costs more effectively.
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