Why is Oz Small Business Optimistic But Not Hiring?

The vast majority of small business owners in Australia are optimistic that their country's good economic conditions will remain through 2005. That's according to a survey by Cashflow Manager, an accounting software firm in Adelaide, based on surveying 600 small firms.



A full 92% of the 600 small firms surveyed expect conditions to either improve or remain stable over the next 12 months.



However, only 27% thought they would employ more staff over the next 12 months. This article in NineMSN suggests that the reason for limited hiring plans is due to a hint of caution.



But let me suggest another possible conclusion.



These days, it's a common refrain among businesses of all sizes to be able to do more with fewer people. Productivity gains -- resulting from lightning fast technology advances and ever cheaper technology -- are the key reason.



There was a time not so long ago that it was cheaper to hire people to do tasks than to invest in technology to drive out inefficiencies. Technology was dear.



Now that situation is becoming reversed. The cost of technology keeps going down. Often the cheaper route is to purchase technology to improve business processes.



So whenever I see reports of otherwise healthy economic conditions and business owners with a sense of optimism, yet with limited hiring plans, I can't help but suspect that productivity improvements play a large role.