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New ANZ report highlights two-speed economy impacting small business

  • Small business sales improved in April, up 0.6% year on year but remain weak
  • Regional small businesses performing better than metro areas
  • Extended Easter break has impact on small business sales
  • Victoria, South Australia and Queensland showing strongest growth in April
  • Retail-related small business sales improved relative to last April, but remained weak, implying another difficult trading month for broader retailing in April 

ANZ today released a new monthly economic report showing small businesses in rural and regional Australia are experiencing better trading conditions than businesses in metro areas, reflecting the two-speed nature of the Australian economy and the differential impact strong commodity prices and rising interest rates are having on regional versus metro areas.


The ANZ Small Business Sales Trends series shows growth in regional and rural small businesses was up 1.9% y/y compared to relatively flat growth (-0.1% y/y) in capital cities.


The data is based on the value of credit and Eftpos transactions processed through ANZ systems and ANZ cards transactions processed through other systems for businesses at least two years old with turnover less than $5 million.


ANZ has approximately 20% market share of all card transactions.


ANZ Head of Australian Economics & Property Research, Ivan Colhoun said: “This data is important because it provides an early indication of the ABS’s monthly retail trade survey, which is published in early June. Our data has consistently tracked the ABS numbers but allows greater scope for analysis by state and by category of retailer for small business.”


“The data shows trading conditions have improved slightly for Australian small businesses in April, but overall sales growth remains relatively weak at just 0.6% y/y growth.


“The strongest sales growth in April (y/y) was recorded in services such as hotels and motels, restaurants, travel and entertainment, and trades, which is probably a result of the unusually long Easter holiday this year.


“Conversely, small business sales contracted in April (y/y) for business services, clothing and fashion retailers and personal services. “April YTD average monthly figures reveal the effects of import price deflation in a number of categories, with negative YTD average monthly growth for appliances, automotive, clothing and homewares. The data for April, however, tentatively suggest that some of these deflationary pressures may be beginning to ease, with less negative year-on-year results in most categories.


“Currently small businesses in rural and regional locations are experiencing relatively better trading conditions than businesses in metro areas (+1.9% year on year versus -0.1% year on year, respectively). This likely reflects the general two-speed nature of the Australian economy, with regional areas in general benefiting more from the commodities boom and metropolitan centres arguably more impacted by the Reserve Bank’s restrictive monetary policy. “Across states, the best sales growth for small businesses existing for two years or more was in Victoria and South Australia through the first four months of 2011 (+0.8% and +0.7% YTD average monthly growth year on year).


All other states showed average monthly contraction, with ACT and Tasmania small businesses suffering the most (-4.4% and -3.4% YTD average monthly growth year on year) and Queensland and WA faring relatively less poorly (-0.4% and -1.2% YTD average monthly growth year on year),” said Mr Colhoun.


ANZ General Manager Small Business Banking, Nick Reade, said: “Australian small businesses are still doing it tough.While it’s pleasing to see some growth returning to the sector there are still some areas doing it significantly harder than others.”


“With costs continuing to rise it will be even more important for businesses to manage their cash flow in a fairly stagnant growth environment.


Currency exposed categories will also need to look at their business models given the high Australian dollar, which shows no real signs of abating,” said Mr Reade. 


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