The latest business confidence survey by Roy Morgan Research has revealed a strong improvement during the month of July.
Released yesterday, the survey measured an improvement of 10.2 per cent from June, rebounding from the negative impact of the Budget reflected in the May result and in line with the improvement in consumer confidence since the Budget.
Business confidence is still 12.6 per cent below its October 2013 peak, but it is now above the average of the last four years, according to the survey results of 950 interviews with all types of businesses across Australia.
The survey found the main reason for the improvement in confidence in July was the increase in the proportion of businesses feeling that economic conditions in Australia would improve over the next year and five years.
This is now back to pre-Budget levels.
As a result of the improvement in outlook for the economy, there was an increase to 57 per cent (from 52 per cent) in the proportion thinking that the next 12 months would be a good time to invest in growing their business, the highest level since April 2014.
In the July quarter, finance and insurance was the most confident sector following a decline in mining.
Confidence levels vary by state with Tasmania narrowly the highest, followed by Western Australia, Victoria, Queensland, South Australia, and New South Wales.
In July, all states showed some improvement.
Norman Morris Roy Morgan Research industry communications director Norman Morris said the increase in business confidence in July was expected given the generally positive reaction as seen in the improvement in consumer confidence throughout the month.
“Both business and consumers are obviously overcoming the shock of the Budget and showing increased optimism in the short- to medium-term in the outlook for the Australian economy,” Mr Morris said.
“Confidence in the key areas of retail, construction and manufacturing, which were seen as making up for a slowdown in the mining industry, showed some improvement in July but these sectors all remain below average in confidence,” he said.
While the full impact of the Budget is yet to be seen with problems getting it passed by the Senate, Mr Morris believes this may be resulting in a short-term improvement in confidence but continuing instability and uncertainty is not a good environment to make business decisions.
“In the meantime, the improved level of confidence in the economy picking up over the next five years is likely to increase the appetite for business expansion and borrowing which is good for economic growth and recovery,” he said.
“With businesses becoming more inclined to borrow, banks will need to improve their customer dealings as measured by the Roy Morgan Business Bank Satisfaction, which shows that they are currently 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, he added.