Confidence cracks, and what to expect from the May RBA
The March NAB Business Survey produced a split that matters. Confidence hit its second-worst reading in history while conditions stayed near the long-run average. The gap tells you more than either number on its own. This edition covers the macro picture, 90 people at the Melbourne ETA meetup, what Melbourne CBD office yields are signalling, and two LinkedIn posts worth your time.
The macro picture
Business confidence collapsed to -29 in the March NAB Business Survey, the second largest monthly fall in the survey's history. Business conditions held at +6, near the long-run average, and capacity utilisation rose to 83.1%.
The divergence is the key point. When confidence falls sharply but conditions stay firm, you're looking at sentiment leading the data. That gap tends to resolve in one direction or the other over the following two to three months. The May RBA decision will be one of the first inputs into which way it resolves.
Across the businesses we're working with in services, professional, and B2B sectors, the pressure is showing up differently in each. Credit teams are applying more scrutiny to forward serviceability assumptions than they were twelve months ago. The businesses that tend to navigate this well do three things:
- Start conversations with lenders early, before the urgency is there
- Present clean, normalised financials with costs clearly separated
- Have a clear case for how the facility supports the business
If any of this maps to where you are, reach out and we'll talk it through.
From the ground
Around 90 people came to the Melbourne ETA Central meetup at Loop Rooftop on April 23. The turnout keeps growing, and the energy in the room reflects a space that's maturing quickly.
The room split broadly into two groups: those building their understanding of how acquisition works, and those already in execution mode with due diligence underway and advisers engaged. The community here is still relatively small, but that's increasingly looking like a structural advantage rather than a limitation. Searchers know each other, share notes, and move faster as a result.
Field notes
Melbourne CBD office is yielding 7.08%, above the national average, despite carrying the highest vacancy rate of any major Australian CBD at 19%. Industrial is yielding 5.9% with supply at cyclical lows.
The income data and the price headlines are telling different stories right now. High vacancy has pushed prices down, which has pushed yields up. For investors focused on income rather than capital growth, that yield gap relative to the national average is worth understanding. We looked at the data in more detail in a recent blog post.
From LinkedIn this month
Super gets paid every payday from July 1. Most businesses know. Fewer have looked at the cash flow impact.
From quarterly to per-pay-run is a meaningful shift. Fortnightly payroll means 26 super payments a year instead of 4. The businesses that come out fine tend to do the same things: check their cash position now, get a working capital facility in place before they need one, and update their forecasting so the timing doesn't catch them mid-cycle.
See the post on LinkedIn →About to have a business purchase under LOI? Here's what lenders are actually assessing.
The deal package that lands on a lender's desk determines how smoothly finance progresses. Lenders assess three things: the buyer (experience, capacity, plan for the first 12 months), the business (normalised cash flow, owner-related expenses stripped out), and the structure (equity contribution, working capital on day one). The deals that get funded smoothly are almost always the ones where the buyer has thought carefully about all three before the first lender conversation.
See the post on LinkedIn →Want to talk through your position?
If you're working through an acquisition, reviewing your commercial lending, or just want to understand what's available for your situation, get in touch. Replies come back within one business day.
The information in this article is general in nature and does not constitute financial advice. Please consider whether it is appropriate for your circumstances before acting on it. Jonathan Chan is a Credit Representative (Number 559372) of Finsure Finance and Insurance Pty Ltd (Australian Credit Licence 384704).