continued strength in SME growth outlook

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In January 2025, SME growth remained steady, with revenues aligning with December and the same period in 2024. The Hospitality sector outperformed, benefiting from strong holiday trading, while Retail and Production sectors continued to face challenges with weaker results.

Economic expectations

Encouragingly, SME optimism about the Australian economy is growing, supported by expectations of lower inflation and anticipated interest rate cuts, which are seen as key factors providing a clearer path for growth. Confidence in global economic conditions remains steady, with no major shifts in sentiment.

growth expectations

Accordingly, the upward trend in SME growth expectations continues, with 39% of businesses prioritising growth over the next 12 months—the highest level since February 2024. Simultaneously, the proportion of SMEs planning to exit or downsize continues to decline, reflecting greater business confidence.

Employment Activity

However, recruitment activity remains subdued, with only 11% of SMEs actively hiring—the lowest level in the past 12 months. This represents a significant decline from 27% in January last year, reflecting ongoing caution around headcounts despite improving business conditions.

Political Outlook

While satisfaction with the Federal Government has been improving, overall sentiment remains negative, suggesting that significant work is needed to regain trust as the election approaches.

Additionally, SME decision-makers generally hold a negative view of the Trump administration’s potential impact on the Australian economy, with females and those in smaller SMEs less likely to anticipate positive outcomes.

Overall, SMEs are entering 2025 with cautious optimism, balancing growth ambitions with careful cost management and workforce planning, while remaining mindful of broader economic and political influences.

Please click on this link to access the full report including subgroup analysis by industry sector, size of business and state. Fifth Quadrant and Ovation Research publish monthly updates of this research here. For any questions or inquiries, feel free to contact us here.

SMEs remain resilient