ACCI SMALL BUSINESS SURVEY June Quarter 2015 Identifying National Trends and Conditions for the Small Business Sector

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

Results at a Glance

2

CONTENTS

Summary 3 Small Business Conditions

4

Expected Economic Performance

4

Sales Revenue

5

Wages 5 Non-wage Labour Costs

6

Selling Prices

6

Profits

7

Employment 7 Overtime Utilisation

8

Investment in Buildings and Structures

8

Investment in Plant and Equipment

9

FOREWORD The ACCI Small Business Survey is a national survey aggregated from the surveys conducted by member associations of the Australian Chamber of Commerce and Industry. The data for businesses of all sizes was derived from the ACCI Business Expectations June quarter survey. This survey covers April, May and June 2015. There were 2,549 businesses that participated in the survey, 1,430 of which were small businesses with 0-19 employees.

GENERAL ENQUIRIES

Tim Hicks | Senior Manager – Economic Policy (02) 6270 8000 | [email protected]

MEDIA ENQUIRIES

Ari Sharp | Senior Manager – Media 0439 429 259 | (02) 6270 8000 | [email protected] For more information visit www.acci.asn.au.

© Australian Chamber of Commerce and Industry 2015 ABN 85 008 391 795 This work is copyright. Reproduction is permitted, with direct attribution and notification to the Australian Chamber of Commerce and Industry. AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY

WWW.ACCI.ASN.AU | [email protected] | 02 6270 8000 | TWITTER: @AUSCHAMBER

1

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

RESULTS AT A GLANCE Jun 2014

Mar 2015

Jun 2015

Sep 2015 (e)

Small Business Conditions (actual)

42.8

46.4

42.7

41.3

↓

44.8

Expected Economic Performance (a)

45.4

50.7

47.6

46.3

↓

−

Sales Revenue (actual)

44.1

46.4

45.4

45.7

↑

54.6

Wage Growth (actual)

58.7

56.5

56.2

57.0

↑

57.1

Non-Wage Labour Costs (actual)

60.2

61.1

62.0

65.0

↑

61.7

Selling Prices (actual)

45.6

45.1

46.7

48.2

↑

51.8

Profit Growth (actual)

37.4

38.2

38.2

38.1

↓

46.9

Employment (actual)

46.3

45.0

45.4

44.9

↓

48.4

Overtime Utilisation (actual)

43.4

42.8

41.4

41.0

↓

39.6

Investment in Buildings and Structures (actual)

41.4

41.5

41.3

38.7

↓

41.6

Investment in Plant and Equipment (actual)

45.3

45.3

44.8

44.4

↓

47.5

(a) Expectation for following 12 months (e) Expectation for next quarter

ABOUT THE SURVEY

TECHNICAL NOTE

Throughout this survey, index values are in trend terms.

Each survey reading is calculated by taking a weighted sum of the proportion of responses in each answer grouping to form an index between 0 and 100 (answers are grouped according to the strength of conditions).

An index of 50 indicates an exact balance between those who responded that the variable is growing and those who replied that the variable had declined. Any level below 50 means the variable is falling and a reading above 50 indicates the variable is increasing. Responses are segmented by size of business, with small firms categorised as having fewer than 20 employees, medium having 20 to 99 employees and large as having 100 or more employees.

The strongest answer grouping is given a weighting of 1 and the weakest is given a weighting of 0, with those between receiving a proportional weighting. As a result, if all respondents place their answer in the strongest grouping, the index would be 100. If they all opted for the weakest grouping, the index would be 0. If n is the number of response categories, prop is the proportion of responses in a given category (out of 100) and i is the response category (ordered from 1 = strongest to n = weakest), then the formula for the index is:

= =

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2

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

DIFFICULT CONDITIONS MODERATE FOR SMALL BUSINESS

ǬǬThe index on Small Business

Conditions (p.4) fell to 41.3 down from 42.7 in March, marking the fourth consecutive quarter where the index has declined.

ǬǬHowever, Expected Economic

Performance index (p.4), which measures small business expectations for the economy over the past 12 months, remained flat at 43.7, after falling around 8 points in the three previous quarters.

ǬǬThe Sales Revenue index

(p.5) recorded a slight rise from 45.4 to 45.7 after three consecutive quartlerly declines. The index remains in contractionary territory, where it has been since 2009, but expectations are more positive at 54.6, having risen for two consecutive quarters.

ǬǬThe Profits index (p.7)

also remained essentially unchanged, falling 0.1 points from 38.2 to 38.1. As with sales, the profits index remains deeply entrenched in negative territory, where it has been since 2007, but expectation for profits also received their second consecutive quarterly boost, rising by 0.5 points to 46.9.

SMALL BUSINESS CONDITIONS Trend Index

...... Seasonally Adjusted Index

70

70

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

The latest Small Business Survey results show conditions remain negative for small business in the June quarter, but declines have moderated in most areas and some indicators actually show signs of improvement.

ǬǬThe Wages index (p.5) rose 0.8

points to reach 57.0 in the June quarter, following an increase in the previous quarter and nine consecutive falls before that. The index is now 1.7 points lower than its five-year average, and well below preGFC levels.

ǬǬThe Overtime Utilisation

indicator (p.8) fell for the fourth consecutive quarter to reach 41.0.

ǬǬThe small business Investment

ǬǬIn contrast, the Non-Wage

Labour Costs (p.6) index rose by 3.0 points to 65.0. This is the third consecutive rise in this index, which remains elevated for all business segments, but is reaching pre-GFC levels from a small business perspective.

in Buildings and Structures index (p.8) fell by 2.6 points to the low level of 38.7, while the index for Investment in Plant and Equipment (p.9) recorded a more modest fall of 0.4 points to reach 44.4.

ǬǬThe small business Selling Prices index (p.6) rose modestly for the seventh consecutive quarter to reach a reading of 48.2 in the June quarter. The index has been in negative territory since March 2009, but improved for the third consecutive quarter to reach 51.8.

ǬǬThe small business Employment index (p.7) fell in the June quarter from 45.4 to 44.9, with the index remaining slightly below its five-year average, while expectations rose slightly to stand at 48.4.

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3

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

SURVEY DATA SMALL BUSINESS CONDITIONS ǬǬThe index on Small Business Conditions fell to

41.3 in June quarter, down from 42.7 in March. This marks for fourth consecutive quarter where the index has declined since it peaked at 46.4 last June following two years of gradual growth.

ǬǬThe expectations indicator has been falling for the previous six quarters and fell again in the current quarter, recording a reading of 44.8, down from 46.3 in the March quarter.

ǬǬWhile the index for small business fell, the

Medium Business

.......... Large Business

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30

25

25 Jun-15 Dec-14 Jun-14 Dec-13 Jun-13 Dec-12 Jun-12 Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 Jun-09 Dec-08 Jun-08 Dec-07 Jun-07 Dec-06 Jun-06 Dec-05 Jun-05 Dec-04 Jun-04 Dec-03 Jun-03 Dec-02 Jun-02 Dec-01 Jun-01 Dec-00 Jun-00 Dec-99 Jun-99 Dec-98 Jun-98 Dec-97 Jun-97 Dec-96

indices for medium and large business came in slightly lower, despite having almost reached neutral territory just a few quarters earlier.

Small Business

June 2015

Sep 2015 (e)

Small

41.3

44.8

All Businesses

40.4

43.1

(e) expectation for next quarter

EXPECTED ECONOMIC PERFORMANCE ǬǬSmall business confidence in the Australian economy for the year ahead as measured by the index of Expected Economic Performance remained unchanged after falling for five consecutive quarters. The index remained as 43.7 per cent in the June quarter and over the past year the index has declined by around 8 points.

ǬǬThe indices for medium and large business size

Medium Business

.......... Large Business

70

70

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30

25

25

20

20 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

categories fell during the June quarter. The worst decline was in the large business segment (a fall of 2.2 index points compared to a fall of 1.1 points for medium business).

Small Business

Mar 2015

June 2015

Small

47.6

46.3

All Businesses

43.1

41.6

(a) expectation for following 12 months

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4

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

SALES REVENUE ǬǬThe small business Sales Revenue index

ǬǬExpectations for Sales Revenue in the quarter

ahead remain positive at 54.6 having risen for two consecutive quarters.

ǬǬThe Sales Revenue indices fell for medium and

large business sectors, but from a higher base. The medium business reading fell for the third quarter, while the large business index fell after four strong rises. Both are now slightly below neutral.

Small Business

Medium Business

.......... Large Business

70

70

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30

25

25

20

20 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

recorded a slight rise from 45.4 to 45.7 during the June quarter. This was the first rise after three consecutive quarterly falls and the index remains firmly entrenched in contractionary territory as has been the case since 2009.

June 2015

Sep 2015 (e)

Small

45.7

54.6

All Businesses

48.4

53.9

(e) expectation for next quarter

WAGES ǬǬThe small business Wages index rose 0.8 points

ǬǬThe expected Wages index for small business rose by 1.5 points to 57.1 for September.

ǬǬReadings for all three business cohorts remain

above neutral, but below their historical average. The small business reading is noticeably lower than the readings for medium and large businesses.

Small Business

Medium Business

.......... Large Business

80

80

75

75

70

70

65

65

60

60

55

55

50

50

45

45

40

40 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

from the March quarter and is sitting at 57.0 in the June quarter following a rise in March and nine consecutive quarterly falls before that. The index is now 1.7 points lower than its five-year average.

June 2015

Sep 2015 (e)

Small

57.0

57.1

All Businesses

58.6

58.4

(e) expectation for next quarter

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5

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

NON-WAGE LABOUR COSTS ǬǬThe Non-Wage Labour Costs index for small

ǬǬThe expectations index for Non-Wage Labour

Costs also rose from 59.6 to 61.7 for September.

ǬǬThe Non-Wage Labour Costs index rose for all

three business segments and remain elevated above the levels of the last few years. For the small business segment, non-wage labour costs pressures now appear to have reached preGFC levels.

Small Business

Medium Business

.......... Large Business

80

80

75

75

70

70

65

65

60

60

55

55

50

50

45

45

40

40 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

business rose strongly from 62.0 to 65.0 in the June quarter. This is the third consecutive rise in the index. The Non-Wage Labour Costs index has now risen above its five-year average and is significantly above neutral.

June 2015

Sep 2015 (e)

Small

65.0

61.7

All Businesses

61.8

59.8

(e) expectation for next quarter

SELLING PRICES ǬǬThe small business Selling Prices index rose

ǬǬThe expectations index for Selling Prices in the quarter ahead rose by 1.6 points to 51.8 – the third consecutive rise.

ǬǬIn contrast to the rise for the small business

segment, the selling price indices for medium and large business both fell in the June quarter. All three sectors are now in negative territory, although the small business reading is much closer to neutral.

Small Business

Medium Business

.......... Large Business

65

65

60

60

55

55

50

50

45

45

40

40

35

35 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

modestly for the seventh consecutive quarter to 48.2 in the June quarter, up from 46.7 in the March quarter. The index has now been in negative territory since the March quarter 2009.

June 2015

Sep 2015 (e)

Small

48.2

51.8

All Businesses

46.4

48.1

(e) expectation for next quarter

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6

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

PROFITS ǬǬThe small business index for Profits remained

ǬǬThe expectations index rose for the second

time after six consecutive falls, increasing by 0.5 points to 46.9, indicating businesses believe the outlook for profits is improving.

ǬǬThe Profit indices for small and medium business are both below 40 in the June quarter and the large business reading is below 45. The small and medium business indices both stayed relatively flat this quarter, while the large business reading fell significantly for the second consecutive quarter.

Small Business

Medium Business

.......... Large Business

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30

25

25 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

basically flat, falling from 38.2 to 38.1. The index has been below 40.0 for 19 consecutive quarters and has not recorded a reading above neutral since the September quarter of 2007. The index is slightly above its five-year average, which reflects how bad the profit outlook for small business has been over that time.

June 2015

Sep 2015 (e)

Small

38.1

46.9

All Businesses

40.2

46.4

(e) expectation for next quarter

EMPLOYMENT ǬǬThe small business Employment indicator fell

in the June quarter from 45.4 to 44.9, with the index remaining slightly below its five-year average.

ǬǬExpectations for small business Employment levels rose slightly to stand at 48.4.

ǬǬThe Employment indicator fell for all three

Medium Business

.......... Large Business 70

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

segments in the June quarter, and all three business segments have readings at roughly the same level.

Small Business 70

June 2015

Sep 2015 (e)

Small

44.9

48.4

All Businesses

45.8

47.2

(e) expectation for next quarter

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7

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

OVERTIME UTILISATION ǬǬThe Overtime Utilisation indicator fell by 0.4

index points to 41.0 in the June quarter after similar falls in the previous three quarters.

ǬǬExpectations for Overtime Utilisation remain low, with the September quarter reading sitting at 39.6 points (a change of 1.5 points decrease form the June quarter).

ǬǬOvertime Utilisation indices fell for all three

Medium Business

.......... Large Business

60

60

55

55

50

50

45

45

40

40

35

35

30

30 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

segments and are all in negative territory. The small and medium indices are lower than the large segment.

Small Business

June 2015

Sep 2015 (e)

Small

41.0

39.6

All Businesses

43.1

40.4

(e) expectation for next quarter

INVESTMENT IN BUILDINGS AND STRUCTURES ǬǬThe small business index of Investment in

ǬǬExpectations for Investment in Buildings

and Structures in the quarter ahead remain pessimistic with the expectations indicator at 41.6.

ǬǬThe indices for all business segments remain in

contractionary territory in the June quarter, with the small and large business readings falling, while the medium business reading remained steady.

Small Business

Medium Business

.......... Large Business

60

60

55

55

50

50

45

45

40

40

35

35

30

30 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

Buildings and Structures fell by 2.6 points and remains well below neutral in the June quarter at 38.7. The index is now under below its fiveyear average.

June 2015

Sep 2015 (e)

Small

38.7

41.6

All Businesses

40.7

41.8

(e) expectation for next quarter

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8

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

INVESTMENT IN PLANT AND EQUIPMENT ǬǬThe small business index for Investment in Plant

ǬǬSmall business expectations for Investment in Plant and Equipment rose to 47.5 from 46.3 during the June quarter.

ǬǬAll segments recorded readings in

contractionary territory, but the small and large segments recorded much lower levels than the medium segment.

Small Business

Medium Business

.......... Large Business

70

70

65

65

60

60

55

55

50

50

45

45

40

40

35

35

30

30 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

and Equipment declined by 0.4 points during the June quarter to 44.4 – the third consecutive fall. The index has now fallen below its five-year average and is around the same level as it was a year ago.

June 2015

Sep 2015 (e)

Small

44.4

47.5

All Businesses

45.2

48.1

(e) expectation for next quarter

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9

ACCI SMALL BUSINESS SURVEY JUNE QUARTER 2015

AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY WWW.ACCI.ASN.AU | [email protected] | 02 6270 8000 | TWITTER: @AUSCHAMBER AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY

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10