Roy Morgan Research’s Business Confidence results in April dropped by 7.3 points (down 6.5% to 105.1) from March. This is the lowest level since August 2011 (101.8) and continues the underlying downward trend seen since the peak of 136.3 in October 2013. It is also well below the five-year average of 117.3.
These April figures are the result of 705 interviews with all types of businesses across Australia.
The decline in business confidence occurred across all components of the index but stemmed mainly from a decrease in the proportion of businesses believing that Australia will experience good economic conditions over the next 12 months. The level of agreement with this positive outlook for the economy has declined from 57% in March to 51% in April – the lowest level since Sept 2011.
There was also a big drop in the proportion saying their business was better off financially than a year ago, dropping from 28% in March to only 22% in April.
Monthly Business Confidence -- Australia
Source: Roy Morgan Business Single Source (Australia), December 2010-April 2015. Average monthly sample last 12 months, approx. 1,000.
Norman Morris, Industry Communications Director, Roy Morgan Research says:
“The drop in business confidence is potentially bad news for the Australian economy because it is driven mainly by increased concern that Australia will be facing bad economic times over the next year. In this context, it is unlikely that the drop in the official cash rate that has just been announced by the RBA will encourage increased investment or borrowing, as this depends on a positive outlook, not just the interest rate. The decision to drop the interest rate also sends a possible message to business that conditions and the outlook are currently not good.
“The continued negative economic news provides strong headwinds against which business investment must be made. These negative factors include the collapse in the iron ore price, constant revisions to the federal budget outlook, getting budget measures passed by the Senate, speculation about the forthcoming May budget, the slowdown in China, uncertainty regarding Greece, high unemployment and under-employment and tax reform.
“Despite hopes that other industries will make up for the decline in the mining sector, they continue to show a subdued outlook and so are unlikely to offset the loss. Construction has only around average confidence, and retail and manufacturing are below average. The most positive major sectors are ‘finance and insurance’, ‘accommodation and food services’ and ‘personal, repair and other services’.
“Growth in the Australian economy will not only be largely determined by the willingness of businesses to borrow but by banks being prepared to lend to them. Both sides are likely to show considerable caution in the current economic environment. Banks will also need to improve their relationship with business — as shown by the much lower satisfaction levels when compared to their retail customers — if they are going to retain and attract good business customers.”
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