The latest MYOB Business Monitor: SME Performance Indicator, released by business management platform MYOB today, reveals a small uplift in the December quarter resulting in an SME Performance Score of -2.0 for December 2024, a 0.3 rating increase from August 2024.
The MYOB SME Performance Indicator, which draws on millions of anonymised and aggregated data points from Australian small businesses (with 1-19 employees), calculates gross value added (GVA) calibrated against the economy as a whole. The SME Performance Score demonstrates performance compared to overall GDP, with maximum deviation benchmarked at +5/-5.
While the latest indicator shows a marginal increase in SME Performance Score on the August outcome, it is 0.2% lower than the outcome for June and 5% lower than at the end of 2023.
Paul Robson, CEO of MYOB, said the recent period of positive change indicates we may see modest GDP growth when the national accounts are released in the coming weeks.
“Small businesses respond quickly to changing economic conditions and are a bellwether to the broader economy.
“The SME Performance Indicator suggests the level of economic activity for Australia’s small business sector may have now reached its lowest point, ahead of a tentative recovery, which is encouraging for the overall health of the Australian economy.
“Significant differences can be seen at industry level. Businesses in retail and hospitality continue to feel the effects of reduced consumers spend as a result of the elevated cost-of-living. In addition to this, operational pressures are high, with utilities a major source of pressure for small businesses.
“However agriculture continues to thrive, providing a boost to regional Australia.
"This week marks the first cash rate cut for more than four years. As inflation slows, consumer pressures should ease, potentially allowing the Reserve Bank to lower interest rates further in the future,” Paul said.
Construction sector spotlight
With the housing crisis a top consideration for this federal election year, the latest MYOB’s SME Performance Indicator examines the construction sector.
After a period of subdued growth, the sector is showing early signs of a rebound heading into 2025. The latest MYOB SME Performance Indicator shows construction GVA has remained steady over the past six months, stabilising after a year of decline.
However, underlying trends highlight ongoing pressures within the sector, particularly in the residential market which particularly impacts smaller construction businesses. Since mid-2023, new housing construction has grown by just 0.3%, while renovation activity has declined by 3.8%. This follows a period influenced by COVID-19 where households prioritised home renovations, leading to a temporary boom in this activity over new home construction.
Non-residential construction, which is less reliant on small businesses, has demonstrated greater resilience, growing by 2% since mid-2023 with investment levels now sitting approximately 5% above pre-pandemic levels.
Despite positive indicators, the construction industry remains influenced by labour shortages and high material costs, which have impacted both residential and non-residential projects over the past two years.
Cameron Doueal, owner of Concept Building & Construction Pty Ltd, said times have been uncertain for the construction sector.
“With interest rates going up through 2023 and 2024 it's fair to say that enquiries dropped off and of the enquiries we have had some have either had the scope reduced or the project hasn’t gone through at all. Clients just don’t have the willingness to invest in their house as cost-of-living pressures come to the fore.”
Dr Angela Jackson, Lead Economist at Impact Economics and Policy, said the December 2024 edition of the MYOB SME Performance Indicator highlights that, while small businesses across Australia continue to navigate challenging trading conditions, there are encouraging signs that the economic environment may be turning a corner.
"As a key indicator of broader economic trends, small businesses tend to experience the effects of economic shifts earlier and more acutely than their medium and large counterparts. The MYOB SME Performance Indicator provides valuable insight into these changes, serving as an early signal of movements in Australia’s wider business landscape and economy. While the December edition suggests that small businesses may not be a major driver of GDP growth in the December quarter, the sector is demonstrating resilience, with signs of improving conditions emerging.
“It’s clear from the depth of this data that MYOB’s SME Performance Indicator can help economists predict measures such as GDP, wages growth, jobs growth and consumer spending.,” Dr Jackson said.
“With small businesses providing about a third of the economy’s value, this data provides a comprehensive and timely picture of the state of Australia’s economy and will help governing bodies like the RBA to make critical decisions.”
The MYOB Business Monitor: SME Performance Indicator can be found at: MYOB Business Monitor: Small and Medium Enterprise (SME) Performance Indicator
ENDS
For more information, please contact:
Collette Betts
Corporate Affairs Manager
E: collette.betts@myob.com