It looks like small and micro businesses are starting to feel a bit more upbeat about the future, according to NAB’s latest Quarterly SME Business Survey. While things aren’t all sunshine and lollipos just yet, the signs are definitely heading in the right direction.

Business conditions for small businesses nudged up by three points in the first quarter of 2025 and it’s the smallest players who saw the biggest bounce. Australia’s micro businesses actually edged into positive territory, climbing five points to land at +1. Not too shabby!

Mid-tier businesses also perked up a bit, while bigger businesses saw conditions slip backward. So, for once, it’s the small end of town showing the big guys how it’s done.

Still a few bumps in the road

Now, before you start popping the champagne, let’s keep it real, things aren’t perfect. Profitability and employment conditions are still sitting in the red, and overall business confidence is still below average, even though it did climb four points this quarter. That said, the mood has definitely lifted, especially in the property and construction sectors.

Transport and finance are also looking relatively strong, although business services seem to be doing it a bit tough, taking a second consecutive dip.

Which states are doing well?

Western Australia and Queensland are leading the charge this quarter, with business conditions improving by six and five points, respectively. NSW and Victoria are still a bit sluggish, both sitting at  minus five index points – and Victoria in particular, is trailing on the confidence front too.

Still, the good news is that every state recorded some improvement. It might be baby steps, but still a positive sign.

Easing cost pressures = a bit of breathing space

One of the big wins this quarter? Cost pressures are easing. Labour costs and overheads have taken a breather, which could offer some welcome relief for stretched small business budgets. Purchase costs did tick up a smidge, but nothing too dramatic.

Meanwhile, forward orders and capital expenditure are both on the up, and capacity utilisation is holding steady at just over 80 per cent – bang on the long-term average.

What does it all mean?

In plain English: it’s been a bit of a slog lately, but small business owners are starting to feel a glimmer of hope. With conditions improving and costs easing, there’s a bit more room to breathe and maybe even a chance to plan for growth.

Of course, challenges remain (when don’t they?), but it’s great to see the small end of town holding their own and even outpacing the big guys in some areas. Here’s hoping Q2 continues the upward trend!

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