Roy Morgan Research’s latest Business Confidence survey in June 2014 fell a further 6.2 points (5.4%) from May (to 108.1), continuing the negative impact of the Budget reflected in the May result and in line with the drop in consumer confidence since the Budget. Business confidence is now 28.2 points (20.7%) below the peak of 136.3 in October 2013 following the new government and the lowest level recorded since June 2012 when it was 105.4. These June figures are the results of 1,240 interviews with all types of businesses across Australia.
The main reason for loss of confidence in June was the decline in the proportion of businesses feeling that economic conditions in Australia would improve over the next five years. This is now at its lowest level since August 2011.
As a result of this decline in outlook for the economy, there was a drop to 52% (from 54%) in the proportion thinking that the next 12 months would be a good time to invest in growing their business, the lowest level since June 2013.
Monthly Business Confidence - Australia
Source: Business Confidence, Roy Morgan Business Single Source (Australia), December 2010 – June 2014, average monthly sample, n = 2,122
In the June quarter, finance and insurance (137.4) was the most confident sector following a decline in mining (to 136.2). The high-profile sectors in which hopes for economic recovery have been focused remain below the average confidence level and are showing no improvement, with retail on 105.3, construction at 110.5 and manufacturing at 106.6.
All states now have very similar levels of confidence, with Western Australia narrowly the highest, followed by Tasmania, Victoria, South Australia, NSW and Queensland. In the June quarter, all states showed some decline.
Norman Morris, Industry Communications Director, Roy Morgan Research, says:
“The decline in business confidence in June was expected given the generally negative reaction as shown in the drop in consumer confidence following the Budget. Both business and consumers are obviously far from convinced that the economy will improve in the short- to medium-term, with both measures of confidence only marginally in a positive range with the June average for consumers on 103.3 and business very similar on 108.1.
“The hoped-for improvement in confidence in the key areas of retail, construction and manufacturing, which were seen as making up for a slowdown in the mining industry, did not happen during June, and these sectors all remain below average in confidence.
“The full impact of the Budget will ultimately depend on the extent to which the Federal Government is able to get it passed by the Senate and how long this process is dragged out, creating instability and uncertainty, which is not a good environment to make business decisions.
“In the meantime, the low level of confidence in the economy picking up over the next five years is subduing the appetite for business expansion and borrowing which is not good for economic growth and recovery. Not only are businesses becoming less inclined to borrow but they are also having issues dealing with banks, with the Roy Morgan Business Bank Satisfaction showing that they are well below the satisfaction level of the banks’ personal customers. It is obvious from this that banks and business will need to work more closely with each other if they are to achieve a positive outcome for all parties and the economy.”
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