Small business confidence in NSW has stabilised, with a slight increase in optimism in February, according to the latest NSW Small Business Commission Momentum Survey.

While confidence is still low—rising just one percentage point to 25 per cent—business owners are finding ways to adapt despite ongoing economic pressures.

The report highlights that businesses are still struggling with rising costs, compliance burdens, staff shortages, insurance hikes, and weaker customer demand. However, there were some positive signs, particularly after the Reserve Bank of Australia’s latest cash rate decision. Confidence jumped by seven percentage points in the week following the announcement, suggesting that interest rate stability is playing a role in business sentiment.

Revenue and profitability show signs of improvement

Despite a tough start to the year, some businesses are expecting better financial results in the coming months. The number of businesses predicting an increase in profitability rose by four percentage points in February, with 14 per cent of businesses now expecting to see higher profits over the next three months.

Similarly, 19 per cent of businesses expect revenue to grow in the next quarter, up from 16 per cent in January. While these numbers are still relatively low, they suggest a cautious sense of optimism among some small business owners.

Costs and red tape remain major concerns

The biggest headache for small businesses is still the cost of doing business, with 84 per cent of respondents saying input costs are a top concern. While this figure has dropped slightly from January, it remains the most pressing issue for business owners.

Other major worries include cash flow and access to working capital (76 per cent), as well as rising energy and gas prices (74 per cent). Compliance and red tape also remain a burden, with many business owners calling for more support from the government to cut back on unnecessary regulations.

Expansion plans and hiring outlook

Despite the economic challenges, some businesses are looking to grow and adapt. Around 33 per cent of businesses said they have plans to expand, a three percentage point increase from January. This includes businesses investing in new equipment, expanding their product range, or moving into online sales.

However, the survey also found that fewer businesses are planning to hire staff, with hiring intentions dropping by seven percentage points to 46 per cent. Given ongoing labour shortages and wage pressures, some business owners may be holding off on recruitment until conditions improve.

While overall business confidence remains subdued, the latest data suggests that some sectors are beginning to find their footing. Interest rate stability and slight improvements in profitability expectations could be signs of better conditions ahead.

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