The slowdown in consumer spending hit small-to-medium sized businesses (SME) hard at the end of 2008, a survey has found.

A survey from the National Australia Bank (NAB) found business conditions among SMEs fell three index points to minus-four points in the December quarter, the lowest result since the data series began in June 2006.

A reading below zero indicates pessimists outnumber optimists.

Twenty-seven per cent of SMEs said conditions were “poor or very poor”, compared with 23 per cent of them who said things were “good or very good”.

NAB general manager of business banking Geoff Greer said SMEs were hoping the federal government’s $42 billion fiscal stimulus package will boost consumer spending and improve conditions.

“Business directly affected by the downturn in consumer spending are finding it hard going,” Mr Greer said in a statement.

“Property services, residential construction and motor vehicle retail industries, have been hit hard by the slump in spending.”

The survey comprised interviews with 650 firms with an annual turnover of between $2 million and $10 million.

It found smaller firms - those with annual turnover between $2 million and $3 million - were the worst performing segment, while large-sized (turnover between $5 million and $10 million) companies had coped best.

On a state-by-state basis, the survey found SMEs in South Australia, Victoria and Western Australia appeared to be “weathering the storm”.

However, business conditions remained poor in Queensland and New South Wales, which were the worst and second-worst performing states, respectively.

NAB state general manager NSW/ACT of business banking Jaap Jonkman said the NSW housing sector was struggling.

“The much talked about housing cool down in New South Wales has had a significant impact on the housing and construction sector across the state,” Mr Jonkman said in a statement.

“Despite the federal and state government packages to kick-start the housing economy it seems there is still a lot to do to get the market in NSW back to full health.”

The survey found the SME’s outlook for the March quarter was bleak, with the business confidence measure falling to minus-26 index points.

AAP