Interest rate cut gives a boost to confidence

Preliminary analysis of data from the NSW Small Business Commission’s Momentum Survey provides early evidence of a boost to small business confidence following the interest rate cut earlier this month. In the week before the cash rate cut was announced on 18 February, 21 per cent of businesses indicated they were confident about their future prospects compared to 28 per cent in the week following the announcement. 

However, the January 2025 Momentum Survey continues to point to challenging trading conditions, with businesses anticipating a difficult 2025. Between December 2024 and January 2025, small business confidence declined by four percentage points to 24 per cent. This reversed the improvement observed the previous month. 

In January, businesses in Greater Sydney were slightly more confident about their individual business prospects than their regional counterparts (25 per cent compared to 23 per cent). Fifteen per cent of businesses indicated they were confident about their local economy. 

Businesses reported rising input costs, compliance burdens, staff shortages, insurance costs, weaker customer demand, government fees and charges and an uncertain economic outlook as factors weighing on confidence. 

Business expansion plans recovered following a deterioration in December, likely due to seasonal factors, with investment and staffing decisions often deferred over the Christmas and New Year period. Thirty per cent of businesses intend to grow, alter, or expand their operations. Of these, more than half (53 per cent) are looking to hire additional staff. 

However, business performance deteriorated in January with profitability declining. Only 10 per cent of businesses expect their profitability to increase, compared to 40 per cent expecting a decline. Meanwhile, expectations about revenue stabilised, with 16 per cent of businesses anticipating an increase in revenue, compared to 30 per cent expecting a decline.