Australia: Business conditions strong - NAB

Analysts at NAB note that in Australia, small and Medium Enterprise (SME) business conditions were unchanged in Q1 2018 at +12, while SME business confidence declined 2pts in Q1 to +6pts.

Key Quotes

“According to Alan Oster, NAB Group Chief Economist “SME business conditions remained at their highest level since the GFC and while SME business confidence slipped in the March quarter it too remains above average.”

“While there was a widening in the performance gap between SME and large businesses, the still strong readings for SME conditions suggest this is not a major source of concern given that leading indicators in the survey are generally positive” said Mr Oster.

“SMEs are increasingly reporting that it is difficult to find suitable labour, another sign that the labour market is tightening, although we are yet to see any flow through to wages” said Mr Oster.

“As with the QBS, special questions were asked in the Survey related to company tax – what sized cut would be needed to improve the business outlook and how would the additional resources gained from a tax cut be used.”

“According to Mr Oster: “The results of special questions included in this quarter’s survey on corporate taxes are broadly similar for large and SME businesses, although on balance, more SMEs see a tax cut as potentially beneficial than do large businesses possibly in part because a greater proportion of the latter do not pay tax in Australia. For SMEs, as for large businesses, the major initial impact if there were a tax cut is likely to be on business investment.”