The Westpac-Melbourne Institute Small Business Index has fallen 15.8 points between February and April of this year. This equates to a 12.7 per cent drop in small business confidence.

The Index reflects the current outlook, performance, and future hopes of the Australian small business sector. And despite the drop, any report above the 100-meutral mark is indicative of some optimism.

Julie Rynski, general manager of Westpac’s small business arm, said it wasn’t “all doom and gloom” for the small business sector.

“This Index was taken before the federal Budget announcement, which included a number of tax breaks and allowances for small business, and should result in improved conditions and increased sentiment among Australian small businesses over the next quarter.”

Indeed, it doesn’t appear the Federal government’s Small Business Budget sweetener could have come at a better time.

These measures proposed a 1.5 per cent cut in tax for businesses with less than $2 million in annual turnover and instant asset write-offs for items up to $20,000.

The Wholesale & Retail Trade sector posted modest gains, according to the Index. Growth between February and April crept along from 99.3 to 103.2.

Ms Rynski attributed this growth to stronger performances in retail trade in recent months, buoyed by a significant rise in consumer confidence and spending.

But the Index did draw attention to several negative factors affecting small businesses: 39.3 per cent cited the economy as impacting negatively on business performance, while 35.8 per cent still chaffed under archaic and/ or needless regulation.

“Small businesses are highly exposed to changing macro-economic conditions,” said Ms Rynski, “which has consistently been the main factor dampening performance.

“The deteriorating economic outlook, elevated unemployment expectations, and complex regulations have resulted in a challenging operating environment for the sector.”

That small business still maintains a positive outlook, despite the current economic climate, is a good sign.

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