Is Queensland small business optimism on the rise?
Small businesses say that, individually, they are doing reasonably well in these challenging times.
Collectively, they have expressed concern about the state and national economy for 2017.
CCIQ’s latest Queensland Economic Update and Pulse Survey point to an improving situation in the lead-up to Christmas.
Anecdotally, business have talked about consumer confidence and spending on the return. But they need three months of improving conditions to confirm the economy has, in fact, turned the corner.
So, is small business optimism on the rise in the Sunshine State?
As the Queensland economy continues to disentangle itself from the boom in mining investment, confidence in the 12-month outlook of state performance remains at a low level within the small business community.
Results from the CCIQ-Suncorp Pulse Survey indicate that for the past two years, confidence in the performance of the Queensland economy has been weak, with the September Quarter 2016 figure being 41.4 – 7.8 points below the five-year average.
The fact that this measurement has deteriorated across the past two quarters is remarkable, especially when it is considered alongside some of the key indicators that underpin overall economic performance.
With the exception of unemployment, there are many positive signs across the Queensland economy relative to the rest of Australia, especially when this is considered within the context of low inflation, low wages growth and low jobs growth.
Activity in the Queensland economy expanded in the September Quarter, if only by 0.1 per cent, driven by a rise in household consumption (1.0 per cent) and private capital expenditure (2.1 per cent), while the national figure contracted.
Performance in the retail sector is also beginning to return, with sales growth increasing at a larger rate than the national average and edging towards the long-run average of 4.3 per cent, through strong figures across clothing, hardware, and homewares.
Despite having reached its peak, residential dwelling approvals remain at elevated levels, and although concerns surrounding an oversupply of high-density stock will persist, this should provide a solid pipeline of residential construction work in the short term.
Tourism, which has long been a key pillar of overall economic performance in Queensland, is also displaying signs of strong performance with international visitor numbers increasing by 13 per cent in the 12 months to September 2016.
In addition to this, the spend by international visitors is up 11 per cent, bringing in approximately $5.2 billion to the Queensland economy.
As indicated by the CCIQ Economic Performance Indicator, which compares activity in the Queensland economy to the rest of Australia, the combined effect of these individual indicators has been sustained improvement since a low point in November 2015.
Indeed, compared to the rest of Australia, the Queensland economy is performing 3.1 points above its own five-year average.
Source: ABS, CCIQ
Given this context, it is surprising that the small business community continues to have such a low opinion of the state economy and its likely performance over the next 12 months.
It is also intriguing that the fall in confidence surrounding the Queensland economy is diverging from the index of small business optimism, which is also constructed from data collected through the CCIQ Pulse Survey.
While still below the five-year average, small business optimism recorded a substantial rise in the September Quarter 2016, suggesting that at an individual level, there is a growing sense that business conditions are improving.
If individual business owners across Queensland are beginning to record an optimism in their own operations, it raises the question as to why this is not translating into a similar level of confidence in the economy as a whole?
Discussions with the small business community would suggest that concerns generated by an uncertain global political environment and a world economy that is experiencing slow growth are suppressing confidence in how the economy will be performing in 12 months.
In addition to this a minority government in Queensland and a tendency for debate in the Legislative Assembly to be negative, it is perhaps understandable why there is a divergence at present between individual business performance and expectations for the economy as a whole.
In broad terms however, it would appear that small business optimism is beginning to align with improvements in the Queensland economy that have been occurring across the past 12 months.
Should the improvements recorded in the second half of 2016 persist into the new year, it is certain that a similar response will also be seen in overall confidence in the Queensland economy as the state continues to transition from the mining boom.