SME Liquidity Fell 7.3% While Sales Fell 2.2%. The Second-Strongest Industry on Shift’s New Index Lost 38.4% of Its Cash

The Index came in at 49.4 in September — below the neutral 50 line, down 0.9 points on August’s 50.3 and 2.7 points below the 52.1 posted a year earlier. On its own that is a soft but unremarkable number, and the report is careful to say so: readings between 49 and 51 reflect average conditions.

The number worth carrying into your next business finance conversation sits a few pages further in. Across the same customer base, average monthly sales per business were $323,000, down 2.2% on a year earlier. Average monthly liquidity — the cash those businesses actually hold — was $104,000, down 7.3%. Revenue has barely moved. The buffer behind it has fallen more than three times as fast.

That gap is a broker problem, because almost everything a business finance assessment runs on is a revenue figure.

A new monthly reading, and what it measures

Shift’s stated reason for publishing is a gap in the data. “There is no consistent, timely measure of how Australia’s SMEs are faring,” the report says. “Government agencies define an SME in different ways, and much of the current commentary draws on sentiment surveys.” Shift chief executive Jamie Osborn puts it more bluntly in the report: “SMEs are too important, and too poorly measured, to sit at the margins of the national conversation.”

The methodology matters if you intend to use it. The Index is a diffusion measure anchored at 50, tracking how many SMEs are growing their revenue rather than how much revenue there is. A reading below 50 means fewer businesses than usual are growing; it does not mean total revenue is falling. The report treats readings above 51 as strong and below 49 as soft, with the band between the two as ordinary. This first edition runs from June 2021 to September 2026 and is authored by Daniel Straton, CFA, of Shift’s strategy and data team, with data analyst Phillip Kristyono.

One limitation is worth stating plainly, and the report does not hide it: this is a lender’s own book. The figures are averages across more than 6,000 Shift customers, not an economy-wide survey, and businesses that have taken working capital finance are not a random sample of Australian SMEs. Read it as a timely signal from one sizeable slice of the market, not as a national statistic.

Cash is falling three times faster than sales

The longer series is where the divergence becomes hard to dismiss. Averaged by financial year, monthly sales rose every year from FY2022 to reach $331,000 in FY2026, and sit at $323,000 for FY2027 to date. Monthly liquidity peaked at $131,000 in FY2023 and has fallen in every year since, reaching $104,000 for the September quarter. Five years of flat-to-rising turnover; five years of thinning cash.

Split by business size, the squeeze is clearly bottom-weighted. Liquidity was lower than a year earlier in all three segments the report tracks, but Small businesses were down 13.1% to an average $29,000, against 8.9% to $110,000 for Established businesses and 7.8% to $441,000 for Corporate. On momentum the same pattern shows up: Corporate was the only segment above 50, at 50.2 and essentially unchanged on the month, while Small sat at 49.7 and Established at 49.0 — the weakest of the three.

Warren Hogan, managing director of EQ Economics, supplies the economist’s view in the report and attributes the slowdown to “a series of shocks” — the reversal of the 2025 interest rate cuts, higher energy costs after war broke out in the Middle East, and weaker established housing markets. He also notes that the Reserve Bank’s late-September cash rate rise, the fourth this year, is not yet in the Index. On his reading, “smaller businesses are bearing the brunt, while Corporate businesses have held up.”

Where momentum and cash disagree

Here is the finding that should change how brokers screen a business finance opportunity. Of the seven industries tracked, only two sat above 50 in September: Manufacturing at 50.8 and Rental, Hiring and Real Estate Services at 50.5.

Rental, Hiring and Real Estate Services also recorded the largest liquidity fall of any industry — 38.4%, to an average $141,000 — with average sales 22.1% below a year earlier. The industry with the second-strongest momentum reading in the sample holds the worst-deteriorating cash position in it.

Run the comparison the other way and it inverts again. Transport, Postal and Warehousing sat below neutral at 49.1, yet posted the largest monthly gain of any industry, up 2.3 points, with average sales 8.5% higher than a year earlier. Construction read 49.6 and was one of only two categories in the whole report where liquidity rose, up 3.3%, with sales 7.9% higher. Manufacturing sales were up 3.3%.

The genuine casualty is hospitality. Accommodation and Food Services recorded the lowest industry reading at 45.6, a 10-point fall in a single month — the largest move in the report — with average sales down 14.8% to $180,000 and cash reserves down 29.4% to $50,000. Hogan describes it as the most volatile industry of 2026. A hospitality file assessed on trailing twelve-month turnover is being assessed on a trading period the business is no longer in.

The state split is not where you would guess

NSW recorded the highest state reading at 50.6, little changed on the month and down 1.8 points on the year, and was the only state where liquidity rose, up 6.1%. Hogan notes it has held up despite falling Sydney house prices and has shown tentative signs of rising momentum.

Western Australia posted the lowest reading at 47.9, after the largest monthly fall of any state at 2.4 points — though from a high base, following what the report describes as several years of above-average growth. WA nonetheless records the highest average monthly sales of any state, at $416,000, alongside a 13.3% fall in liquidity. Victoria sat at 48.1 and fell the most over the year, by 4.7 points.

Queensland is the quiet one. At 50.0 it reads precisely neutral and down just 1.4 points on the year, the smallest annual fall of the five states — and it carries the steepest liquidity fall of the five states, at 18.8%, on the lowest average monthly sales of any state at $287,000. A broker screening by state momentum alone would file Queensland under “fine”.

Capacity is expanding into a thinner buffer

The timing is what makes this more than an interesting chart. In the same week the Index landed, Bizcap doubled the maximum on its Fast Business Loan from $500,000 to $1 million, without property security, as reported by Broker Daily on 28 October. Chief credit officer Tony Truong framed the move around urgency: “Businesses don’t suddenly become less time-sensitive because they need $750,000 rather than $250,000.” Co-founder and co-chief executive Zalman Blachman cited “strong demand from businesses and our referral partners for larger, more flexible funding options.”

None of that is a criticism of the product or the lender. Larger unsecured limits are a genuine expansion of what brokers can solve, and demand for them is real. But the two data points sit together uncomfortably, and brokers are the people standing between them: the facilities available without property security are getting bigger at the same moment the average cash buffer underneath them is getting smaller. Whatever the lender’s credit appetite allows, the conversation about whether the client can carry the repayments belongs in your file.

A new line item in the bank statements

One side finding is worth a broker’s attention for a different reason. Among Shift customers who pay for software subscriptions, 19.2% paid OpenAI in September 2026, up from 2.2% in June 2023. Anthropic sat below 1% until January 2026 and has since reached 9.9%. The typical spend differs sharply: the median business paying Anthropic spent $153 in September, up from $34 in January, against roughly $32 a month for OpenAI since 2023.

Spending is concentrated — in September, the 18% of AI-paying businesses using both providers accounted for 52% of AI spending — and the report notes these figures cover direct payments to those two providers only, so they understate total AI spend. For brokers, the point is mundane and useful: AI subscriptions are now a recurring, growing and visible line in business transaction data. When you are reconstructing a borrower’s cost base from bank statements, it is a category that did not meaningfully exist two years ago and is no longer rounding error.

What to review on the file this week

1. Convert the repayment into weeks of buffer, not a percentage of turnover. Take the client’s current average cash position from recent statements, not a prior-year figure, and work out how many weeks of that the proposed schedule consumes. Record the result.
2. Ask for current-period trading, not just the last full year. A 10-point single-month move in one industry is the clearest argument in this report against relying on trailing twelve-month data for a cash-flow-sensitive deal.
3. Screen on industry and cash, not industry alone. Hospitality and rental, hiring and real estate are the two categories where cash has deteriorated fastest, and only one of them looks weak on momentum.
4. Re-run the numbers on deals in your pipeline from before late September. The report’s own economist flags that the September cash rate rise is not yet in the data. Anything priced or assessed before it may be carrying a stale assumption.
5. Document the conversation, not just the outcome. If the client’s buffer is thin and they want the facility anyway, the file should show that you raised it, what you compared, and why you landed where you landed.
6. Check what your business-lending clients would do if revenue slipped a month. On these figures, for a small business, the answer is increasingly “not much” — and that is a retention conversation as much as a credit one.

Where your obligations actually sit

A word of caution on the compliance overlay, because it is easy to over-apply. The best interests duty and the responsible lending framework attach to credit assistance on regulated consumer credit. Whether a particular business or equipment facility is regulated credit — and therefore whether the duty attaches to your assistance on it — turns on the purpose of the credit and how the deal is structured. That is a question for your licensee and compliance team on the specific file, not something to settle with a rule of thumb.

Where the duty does apply, ASIC’s guidance is not ambiguous about the breadth of it. RG 273.133 states that for a mortgage broker, “the best interests duty applies to any credit assistance you provide”, including “any standalone credit products on which you provide credit assistance”. And on what the file should contain, RG 273.165 says ASIC generally expects records to include “the options and ultimate recommendation you gave and the reasons why (including a detailed description of your decision-making process)”, alongside “relevant conversations with the consumer”.

Read against this week’s data, that record-keeping expectation is less a burden than a prompt. If you discussed a client’s cash position, if you weighed a smaller facility against a larger one, if you declined to proceed — that reasoning is exactly what a good file captures, and exactly what nobody can reconstruct twelve months later from a loan amount and a turnover figure.