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March 8, 2008 ( PowerHomeBiz
) - Victoria, Au ---
A National Australia Bank Ltd (NAB) survey shows overall conditions for
small to medium enterprises (SMEs) strengthened in the December quarter, up
five points to 27 index points compared to the previous quarter.
(news continued below)
The survey of 650 firms with at least 35 employees and turnover of
between $2 million and $10 million, shows 41 per cent of SMEs reported good
or very good conditions during the quarter.
This compared with 14 per cent of SMEs that reported poor or very poor
conditions.
SMEs in the business services sector and the health sector reported the
strongest conditions, followed by those in wholesaling.
Conditions for finance and insurance businesses remained above average
but were weaker than previous quarters.
The worst conditions were recorded by SMEs in hospitality, food and
beverage manufacture, petroleum and chemical manufacture and some parts of
retail.
NAB acting executive general manager of business and private banking
Joseph Healy said strong customer confidence was the driving force behind
the favourable conditions.
``The good trading conditions for SMEs in the final quarter of last year
were driven almost exclusively by high levels of customer confidence and
demand, with some positive input from better seasonal conditions and company
specific factors,'' he said.
But those same factors that boosted conditions for small businesses could
also come back to hurt them.
Rampant consumer demand evident in the Australian economy is one of the
chief reasons behind yesterday's decision by the Reserve Bank of Australia (RBA)
to raise interest rates.
By raising rates, the RBA hopes to cool spending in an effort to head off
rising inflation. For businesses, this means reduced profits.
While SME profit growth was strong in the December quarter, with the
survey's profit index up nine points to 31, the forecast for the next 12
months, although favourable, has been revised downwards.
Mr Healy said the forecasts were good but that small businesses were
concerned about potential constraints on future profits.
``SMEs continue to be concerned about potential lack of demand, labour
availability ... and higher wages and interest rates,'' he said.
Source - http://business.smh.com.au/economy-still-revving-smaller-firms-say/20080206-1qk4.html
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