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Business confidence sinks to four-year low

Business confidence has declined further over August, dropping to its lowest level in four years, according to Roy Morgan Research.

The group’s latest survey of 866 businesses showed confidence levels are down 13.5 points from 12 months ago and currently sit at 102.6, remaining well below the five-year average of 116.9.

The current level is the lowest since August 2011, when it was 101.8, and is due to the continued poor economic outlook for Australia over the next 12 months, according to the research.

“It is not surprising that business confidence declined in August, given the ongoing volatility of global financial markets during the month,” Roy Morgan Research industry communications director, Norman Morris, said.

“Of major impact locally was the 8.6 per cent drop in the ASX, the result of increased global economic and political uncertainty, particularly the dramatic movement in the Chinese stock market.

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“Continued low commodity prices and their negative outlook, poor GDP growth, and the plummeting Australian dollar are all contributing to uncertainty in the market and impacting business confidence.”

Mr Morris said while there is hope that the mining sector’s decline will be compensated by growth in other sectors, it is “unlikely given the below-average confidence levels in key industries such as manufacturing, agriculture and retail”.

“Confidence in the all-important construction industry remains only around average, and is not showing any real signs of improving. The industries showing above-average confidence include finance and insurance, rental and real estate, and the wholesale trade,” he added.

The research indicated that business confidence is unlikely to increase in September, with the first week of the ANZ-Roy Morgan Consumer Confidence falling to 106.7 – putting it only marginally ahead of business confidence.

“Despite recent government tax incentives for micro and small businesses to invest, it is concerning to see that both these segments have shown a major loss of confidence in August and remain well below the confidence of medium and large businesses,” Mr Morris noted.

“The government’s hope that small business would drive growth in the economy now looks unlikely.”

Business confidence sinks to four-year low
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