Businesses feel optimistic about their growth prospects following the Reserve Bank's first rate cut in more than four years, while a lift in profit and inventories shows modest signs of a rebound.
Buoyed by the prospect of lower interest rates, small and medium enterprises plan to expand operations, buy new equipment and boost marketing budgets in 2025, a survey by business lender Judo Bank has found.
Sentiment has surged, with 68 per cent of the 517 surveyed business owners confident about their growth outlook this year, said the bank's managing director of relationships Ben Tuszynski.
More than four in five survey respondents reported stable or strong business health, despite almost half of employers finding it hard to secure staff amid heavy competition for workers.
The labour market eased slightly in February, with job ads dropping 1.4 per cent according to ANZ and job platform Indeed.
But that barely cancelled out a 1.3 per cent increase in January, suggesting tightness persists in the job market.
Given the resilience of the labour market and stabilisation of leading indicators, ANZ expects the unemployment rate to peak at 4.2 per cent in the June quarter before falling back below four per cent by the end of 2026.
Some of the stabilisation could be explained by steady improvement in market-sector jobs growth over 2024, said ANZ economist Sophia Angela, with the accommodation and food services industry recording the largest rise in employment.
The growth in business confidence points to strengthening in the private sector, which has stalled in recent years as high inflation and interest rates sapped consumer activity.
But the recovery remains restrained, business indicators released by the Australian Bureau of Statistics on Monday showed.
Company profits rose 3.2 per cent in the December quarter from the previous three months, adjusting for inventory valuations, while non-farm inventories grew a touch stronger than expected at 0.1 per cent.
The figures suggest activity in the private sector was still modest at the end of 2024, said CBA economists Stephen Wu and Harry Ottley.
"While we have seen some pick-up in household consumption growth and dwelling investment has continued to improve, there has been growing weakness in business investment," they said.
Although small and medium businesses were increasingly optimistic about the future, they were were feeling constrained by excessive red tape, said Mr Tuszynski.
"They tell us it's the disproportionate challenges of compliance costs and the time and resources needed to navigate a multitude of health and safety laws, employment laws, tax requirements and even food and safety regulations that they feel the burden of," he told AAP of Judo Bank's survey.
With the federal election looming, more than six in 10 said their vote would be directly impacted by polices around business regulation and workplace reform.
