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04 Sep 2012
By Christena Singh
Sep
04
2012

A tale of two sectors…

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I hear a lot about the two-speed economy. It sounds like a nice simple concept, but when you think about it, apart from my seven year old, I don’t know many things that only operate at only two speeds. The two-speed economy concept is usually in reference to the mining and non-mining sectors, or states and territories that are reliant on mining or otherwise. But for Australia’s small and medium businesses, the story is not so simple…

When we look at the confidence of small and medium businesses, we don’t see a two-speed scenario, rather we see confidence levels varying significantly, right across a large spectrum. In the September 2012 Sensis® Business Index, we found SME confidence varying from a net balance of negative 14% for the transport and storage sector, to positive 52% in the health and community services sector, a huge difference.

So what are the underlying factors for these sectors? If you look at the longer term trends for SME confidence in each of these sectors you can see quite different factors behind confidence. For the health and community services sector, SME confidence has remained strong over the longer period, in fact throughout the whole GFC period to the present day confidence has been above the national average. Whilst there was still some impact from the GFC, confidence has remained strong in the sector, because economic factors do not play a large role in people’s decision to use health services.

Which is exactly what SMEs in the health and community services sector told us in our latest survey – the main factor for strong confidence this quarter was providing a necessary product or service.

By contrast, SME confidence in the transport and storage sector has been more volatile. In our latest survey, transport and storage SMEs were most concerned about the general economic environment, that they were seeing businesses closing, that they were having trouble with bad debts and that many businesses were cutting back on expenses.

But back to the point about the two-speed economy, which, as you can see, operates at a whole range of speeds. Even within those sectors, businesses are performing at many different levels. For example, in the transport and storage sector, where confidence was weakest last quarter, nineteen per cent of SMEs reported that they actually increased their sales compared to the previous quarter! Obviously they missed the message on the two-speed economy…

Because for SMEs, the spectrum shows there isn’t one. It is important to think of your business in terms of the individual factors affecting it, and how you can best aim for growth, regardless of which sector you are in.

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