City SMEs lag behind regional counterparts for growth: Survey

Small-to medium-sized businesses in regional Australia are doing better than their city counterparts thanks to the mining boom, the rebuild from the summer’s natural disasters and good conditions in agricultural areas, ANZ says.

But Nick Reade, ANZ general manager for small business, says conditions remain tough overall for Australian small businesses and there is a two-speed economy within regional areas also.

The ANZ Small Business Sales Trend has found that monthly growth in regional and rural small businesses was up 1.9%, compared to relatively flat growth (-0.1%) in capital cities.

The series tracks credit and debit card transactions through its system to measure trading conditions for SMEs at least two years old with turnover less than $5 million.

Reade says while the resources hot spots in Western Australia and Queensland are part of the picture, rain has brought good times to towns such as Wagga Wagga in New South Wales which have been battling years of drought.

And tradies, such as plumbers, electricians and painters, are booming, as the rebuild from the flooding in Queensland, NSW and Victoria gathers pace.

Reade says while ANZ’s trade customers can’t do enough to keep up with demand, those relying on discretionary spending – particularly retailers – are finding that consumers are still holding on to their pennies. Those in business services, clothing and personal services such as hairdressing and dentists also suffered.

Sectors to record yearly growth include hotels and motels, restaurants, and travel and entertainment, although ANZ Head of Australian Economics & Property Research, Ivan Colhoun, stresses the timing of Easter and Anzac Day last month probably played a role in supporting demand. Business demand also underpinned growth, he says.

Colhoun says broadly there hasn’t been growth in overall revenue for a couple of years.

He says the restaurant figures suggest that consumers are not in a bunker, because if they were, they wouldn’t be spending so much on eating out.

“It’s probably an issue for retailers. Consumers are happy to buy, and the volumes are there, but the prices are falling. And when retailers’ prices fall, they need to sell more items,” Colhoun says.

“The retailers’ complaints are probably more about seeing price deflation at the same time as higher costs are coming through.”

He attributes the better performance by rural and regional businesses to the mining and commodity booms, and improvements in weather.

“And then the Reserve Bank, of course, has got a very restrictive monetary policy which tends to hit the cities more than the regions because they have higher house prices and are more sensitive to hikes.”

Reade agrees rate rises are weighing on SMEs, but says while input costs are input, cashflow is a much bigger issue.