Roy Morgan Research’s Business Confidence survey in February showed a decline despite the RBA’s decision to lower the cash rate. Business confidence in February dropped by 9.2 points (down 8.0%) from January (to 105.7). The February confidence level is now well below pre-election levels and 22.5% lower than its peak of 136.3 in October 2013, immediately following the Federal Election.
These February figures are the result of 743 interviews with all types of businesses across Australia.
The decline in business confidence occurred across all components of the index but was mainly due to a deterioration in the outlook for the Australian economy over the next five years. This less optimistic outlook led to a decrease in the number of businesses considering that the next twelve months would be a good time to invest in growing their business, a bad sign for economic growth.
Monthly Business Confidence -- Australia
Source: Roy Morgan Business Single Source (Australia), December 2010 – January 2015. Approximate average monthly sample last 12 months, n = 1,095
Norman Morris, Industry Communications Director, Roy Morgan Research, says:
“The decline in business confidence during February was most likely a result of continued uncertainty regarding the level of the budget deficit, difficulties getting elements of the budget expenditure cuts past the Senate, wrangling over leadership, negative employment outlook, global economic issues (including much focus on Greece and China), as well as a general ambivalence in Australian consumer confidence. The RBA rate decision not only failed to counter all these negative factors but possibly sends a message that they are concerned about the economic outlook for Australia.
“The industries that it was hoped would make up for the decline in the iron ore price and mining investment continued to show a rather subdued outlook, and are unlikely to make up for the loss. Construction is now showing signs of weakness, with confidence now below average; while manufacturing has lifted slightly and retail is only average. The most positive major sectors are ‘finance and insurance’, ‘rental, hiring and real estate’, ‘information media and telecommunications’ and ‘personal, repair and other services’.
“Casting a shadow over the country’s economic growth prospects is the fact that businesses are now less confident about investing in expansion. The proportion of those who believe that ‘the next twelve months would be a good time to invest in growing their business’ is now down to its lowest level since September 2012. With a big drop in investment by the mining industry and the less positive outlook by other sectors for growth for the next five years, this will be a major concern for state and federal governments.
“Less confident business borrowers are likely to lead to more cautious lenders despite the fact that there are some signs that banks are stepping up their drive into the business market. For banks to be successful, they will need to achieve more of a customer focus than at present: their business customer satisfaction in January was only 67.7% compared to 82.9% for their personal customers. The extent to which banks pass on interest rate cuts to business is very likely to impact satisfaction levels and, more importantly, their intention to borrow — which was really the purpose of the RBA cut in rates to begin with.”
Roy Morgan Research
Roy Morgan Research is Australia's best known and longest established market research and public opinion survey company. Roy Morgan Single Source is thorough, accurate, and provides comprehensive, directly applicable information about current and future customers. It is unique in that it directs all the questions to each individual from a base survey sample of around 55,000 interviews in Australia and 15,000 interviews in New Zealand annually - the largest Single Source databases in the world. The questions asked relate to lifestyle and attitudes, media consumption habits (including TV, radio, newspapers, magazines, cinema, catalogues, pay TV and the Internet), brand and product usage, purchase intentions, retail visitations, service provider preferences, financial information and recreation and leisure activities. This lead product is supported by a nationally networked, consultancy-orientated market research capability.
P: (03) 9224 5268