Released on: March 5, 2008, 10:59 pm

Press Release Author: - The Australians

Industry:

Press Release Summary: 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.

Press Release Body: Conditions for small- to medium-sized businesses strengthened in
the final three months of last year, boosted by the same factors that led to
yesterday\'s interest rate hike.

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.

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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