Small business owners feel a recession is on its way and just over half think the economy will perform worse over the next 12 months, according to the latest MYOB Australian Small Business Survey released this week.

With 57% of small business owners surveyed believing an economic recession will occur within the next three years, confidence in the Australian economy has declined. In fact, 58% of small business owners surveyed are expecting the Australian economy to perform worse over the next 12 months.

According to Tim Reed, MYOB Australia’s managing director, this shift in confidence is significant, however the declining confidence in the economy and recession worries have not dampened small business confidence about their own business performance.

"Around 54% of small business owners surveyed expect their business performance to be better in 12 months’ time, and while this is slightly down since the last quarter, it shows that Australian small businesses continue to drive our economy forward regardless of whether we are in boom times or periods of market volatility," says Reed.

Despite their personal optimism, the survey also shows that recent interest rate rises are hitting small business owners.

"Naturally, the current volatility in world financial markets and the upward trend in Australian interest rates are having a big impact on small businesses.  Three in five (59%) of small business owners surveyed indicated a negative outlook for interest rates over the next 12 months, a significant increase from previous quarters," explains Reed.

Despite a change in leadership, dissatisfaction with the federal government has increased, with 44% of small business owners surveyed rating the federal government’s performance in contributing to small business as poor.  This is up from 37% in November 2007, prior to the federal election.

"While small businesses believe there will be a recession, they are not actually planning for it," says Reed.  "Around 83% of small business owners surveyed consider planning and preparing a business to ensure survival through an economic recession to be important; however, only 44% actually have a business plan."