BUSINESS CONFIDENCE AT A SIX-YEAR HIGH

SMALL and medium businesses have entered 2017 with their confidence at a six-year high, building on strong gains made at the end of 2016, according to the latest SENSIS research.

In December, the SENSIS Business Index was seven points up on the previous year at +46 - a six-year high - and the chief executive officer, John Allan, says expectations are that this year will be even stronger.

"While business owners again felt optimistic about their own specific business strengths, it was the improvement in the perceptions of the economy which really drove confidence higher this quarter."

The Index, which reflects the views of 1,000 small and medium businesses from across Australia, revealed that more than four times as many SMBs (61 per cent) are now feeling confident, as those who are worried (15 per cent).

There were confidence gains everywhere except for Tasmania down 14 points to +38. NSW is again the most confident location on +54, while the Northern Territory is again on the bottom, despite a seven point rise to +16.

However, the confidence gains in the business fraternity stands in contrast to the Westpac Melbourne Institute Index of Consumer Sentiment, which showed pessimists currently outnumber optimists.

Allan says the national improvement in business confidence was mostly driven by the east coast states.

"The story in Western Australia and the Northern Territory was very different with businesses there still adjusting to the conditions in the resource sector, although the situation has improved somewhat this quarter," says Allan.

Perceptions of the current state of the economy have moved into positive territory, jumping 11 points to +3, which is the best result since December 2013.

"Just as the stock markets shrugged off global uncertainty to finish 2016 on a high, it was also the case for Australia's small and medium businesses. Perceptions of the economy are now in positive territory for both the short and long term projections and this points to a strong year ahead," says Allan.

At an industry level, the biggest improvement was in finance and insurance, up 31 points and now leading the other sectors thanks to strong sales results. The biggest concern was in retail trade, down 23 points due to poor sales, and cost and competitive pressures.

Looking at the year ahead, businesses expect all of the key indicators sales, employment, wages, prices and profitability to remain positive.

"The capital expenditure result was up nine points this year and now sits in positive territory, with businesses also reporting easier access to finance this quarter. These conditions should help foster growth in jobs and the economy in 2017," Allan says.

"The lower Australian dollar also appears to have had a positive impact on exports in 2016, with the number of businesses exporting goods or services rising four points to 15 percent."

Confidence among SMBs in the capital cities rose 14 points to +49, while regional confidence fell two points to +41. The 16-point reversal means metropolitan SMBs are now more confident.