The Australian economy has not yet found balance. One one hand, business conditions, business confidence and consumer demand are trending lower. However, on the other hand, capacity utilisation and employment remain at above average levels, which is driving up costs, wages growth and prices. This in turn is keeping inflation stubbornly above the Reserve Bank’s target range. These factors present challenges for the Reserve Bank with monetary policy. i.e. If it reverts to lifting the cash rate again to limit inflation, this may overplay its hand, weakening business conditions too much and causing a recession.
Purchaser Demand in the Small to Medium Enterprise (SME) Sector
The National Australia Bank reports that the states of Australia with the strongest business conditions are Tasmania, Western Australia and Queensland. The weakest state is Victoria. This strongly correlates with purchaser demand reported via business brokers in each of these states. The other strong correlation is that demand for businesses involved in discretionary retail and services business is at a low level.
Other main themes in SME business demand and transactional activity are as follows…
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