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The latest Quarterly Business Snapshot from Westpac has shown positive trends for Aussie businesses as cash flows rose for the first time in 18 months and the ‘cashflow gauge’ finally steadied (up 1.7 per cent) in Q4 2024.
An overall improvement of 4 per cent in cash flow conditions since the lows of 2022 has been attributed to lower input costs, associated with cooling prices, lacklustre demand requiring less purchases of goods, and ongoing cost management.
Since the second quarter of 2022, the number of businesses reporting an increase in cash flows has risen.
Both revenue and expenses fell at a faster rate throughout the quarter (each falling 1.1 per cent), following an easing in prices that has been felt since 2023. However, according to Westpac, “the cash flow gauge can increase even if revenue declines, if expenses fall by more.”
More cash is coming in, with business deposits seeing the strongest quarterly increase since the pandemic, up 2.6 per cent, and 7.8 per cent annually. Further, commercial businesses reported a liquidity boost of 2.6 per cent and SMEs, 2.4 per cent.
The report said: “Business ‘cashflow’ positions are gradually firming and the overall improvement over the past six months is consistent with our view that economic growth has passed its nadir. Looking ahead, we expect businesses to benefit from several tailwinds. Cost pressures are expected to ease further with wage growth projected to moderate further, with underlying inflation to ease to around target.”
The industries that witnessed the most cash flow gains were:
- Recreation services
- Agriculture
- Healthcare
- Construction
- Retail trade
Meanwhile, the industries with the largest falls in cash flow were:
- Education
- Property and property services
- Manufacturing
- Transport and storage
- Accommodation, cafes, and restaurants
So, what are businesses investing in following these gains? Technology, research and development, and automation were seen as top priorities.
“As new technology flows through business processes, businesses will become more efficient, further helping to contain costs,” said Westpac.
“Investment in automation and digital transformation projects such as AI, cloud migration and e-commerce will also help boost aggregate productivity across the economy, although likely with a lag and there remains some uncertainty over the size of that increase. Rising productivity means Australia can produce more with what we have, reducing price pressures, improving purchasing power and ultimately real incomes.”
[Related: 7 key cash flow drivers for small businesses]
