Australian businesses are largely managing slowing consumer demand and are cautiously optimistic as they head into 2024.
Westpac’s latest Quarterly Business Snapshot (PDF 764KB), which analyses millions of daily business banking transactions and surveys SME business leaders, shows that easing cost and inflationary pressures, and a focus on reducing business costs, is offsetting the decline in consumer demand.
Westpac Chief Executive, Business & Wealth, Anthony Miller said: “Australian businesses continue to face several challenges as the economy slows, however our customers are well positioned coming into 2024.
“The resilience of Australian businesses and their ability to adapt through various setbacks over the last few years is impressive.
“While we recognise there are businesses navigating challenging circumstances, our customer data shows many have been able to manage costs to offset any reduction in turnover. When combined with reduced debt levels or large cash buffers built up during the pandemic, you can see how this is helping to position them for new opportunities as we move into 2024.
“Business cash flow, including debt servicing costs, has improved over the December quarter in most industries, with retail and wholesale trade, manufacturing, and business services outperforming,” Mr Miller said.
Key points from the report include:
- Essential industries benefitting from rapid population growth, including health and education, have also performed better in terms of business turnover.
- Property services, education and construction experienced a drop in cashflow in the December quarter.
- Businesses’ goals for the year ahead were largely dependent on their size. A significant 92 per cent of business leaders employing 20-200 people said they are looking to invest and expand in the next 12 months. In contrast, the focus for 43 per cent of businesses with 20 employees or less is to maintain their business over the next 12 months, rather than to grow or expand.
Westpac Business Bank’s Chief Economist, Besa Deda, predicts that 2024 will be characterised by two halves.
“Over the first half of the year, cash flow will continue to be supported by a moderation in inflation. However, consumer spending will only make a sustained recovery when household finances improve in the second half of the year, on the back of the tax cuts which come into effect from 1 July. Possible rate cuts from the Reserve Bank in the second half may also help prop up spending,” she said.
A copy of the full report is available here: ‘Businesses eyeing a brighter year ahead’ (PDF 764KB).
About the report:
Westpac’s Quarterly Business Snapshot utilises Westpac proprietary data to provide a timely pulse on Australian businesses. The report analyses the millions of daily transactions made by Business Banking customers, unlocking data insights on Australian businesses nationwide. Westpac also commissioned SME research by Lonergan Research in accordance with the ISO 20252 standard throughout Australia. The survey was conducted online amongst members of a permission-based panel. After interviewing, data was weighted to the latest population estimates sourced from the Australian Bureau of Statistics.
