Business confidence Vs interest rate rises

A recent study by Sensis Business Index shows that for the third successive quarter there has been an increase in business confidence among SMEs.

Confidence is now at it's highest level since Aug 07 which marked the start of the economic downturn.  This is on top of the 40% rise in last 3 quarters.

Make it Cheaper says: "Whilst confidence among small and medium sized businesses is up, there still remains one third of businesses who are not confident about the current economic and business outlook"

The vast majority of business still have some strong concerns about their future business prospects, some key worry areas are: making sales (15%),  cash flow (14%) and overheads (5%).

Make it Cheaper says; "Some of these are simple to remove, especially cash flow and overheads, where finding cheaper suppliers of the core services that the business consumes."

Opinion and forecasts predict confidence to plateau over the next quarter.  The report also shows confidence surrounding the future economic direction has fallen 7%.

The main issues facing SMEs are a continued lack of work / sales for the last quarter as well as cash flow issues.

Make It Cheaper says: "The increase in business confidence is very positive and the plateau is understandable.  With the government's decision to raise interest rates for a third consecutive period, SMEs are going to feel the pressure.  Keeping a close eye on business bills and saving money where you can is crucial."

A recent survey by DBM Consultants found "83 percent of SMEs believed their business would be negatively affected by a rate rise, 58 percent believed their costs would likely increase, 36 percent said their profits would decline and 19 percent said they would have to hold back on growth plans"

The interest rate change will add approximately $150 per month on a $300,000 loan.  This is going to affect the SMEs loans, their home mortgage repayments as well as their customers spending power.