More small businesses are confident about posting a profit in the second half of 2009 as the outlook for the domestic economy improves, a survey says.

The findings are in the National Australia Bank’s (NAB) survey of small and medium enterprises (SME) for the June quarter.

The report’s measure of the outlook for profitability among SMEs improved 28 index points to edge into positive territory at plus-one points in the quarter.

A reading above zero indicates optimists outnumber pessimists.

NAB business executive general manager Geoff Greer said while things remained tough for SMEs, the survey represented the “first glimmers of positivity for the future”.

“SME businesses are the real economic drivers in Australia,” Mr Greer said in a statement.

“This will be welcome news to businesses and governments who are hoping that we have turned the corner and are beginning to return to a period of prosperity.”

Mr Greer said recent improvements in consumer confidence and government stimulus had had a positive impact on the domestic economy and “in turn had a flow on benefit to SMEs, particularly medium sized businesses”.

The survey’s measure of business confidence among SMEs rose 15 index points to minus-seven points.

Despite the improved outlook for profits, the report found business conditions among SMEs remained sluggish.

The survey’s measure of business conditions rose two index points to minus-10 points in the June quarter.

The finance, insurance and retail sectors experienced the strongest improvement in business conditions, while manufacturing and construction companies suffered.

Among the states, South Australia and Western Australia reported the best business conditions.

The pair, along with New South Wales, were above the national average.

NAB business NSW general manager Jaap Jonkman (Jaap Jonkman) said the survey’s showed optimism among the state’s SMEs was “slowly returning”.

Victoria and Queensland were below the national average.

The survey interviewed about 650 companies with an annual turnover of between $2 million and $10 million.

AAP