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Business Confidence slumps in August – down 6.5% to 108.6 after interest rate cut; lowest since Turnbull became PM

Source: Roy Morgan Business Single Source (Australia), December 2010-August 2016. Average monthly sample last 12 months = 1,026.

Roy Morgan Research’s Business Confidence fell 6.5% to 108.6 in August. The fall in Business Confidence comes after the RBA cut interest rates to a record low 1.5% in early August. The fall in Business Confidence was far larger than the small fall of the Australian All Ordinaries in August – the All Ordinaries ended August at 5,529 (down 2.0% (or 115pts) from July 31, 2016, 5,644) although the All Ordinaries has fallen further in September – now at 5,324 as of September 12.

The fall in Business Confidence in August means Business Confidence has dipped below the 6yr average of 116.6.

Net expectations of business performance over the next 12 months have fallen to 17.2pts (down 5.2pts in August) and net views of whether the next 12 months will be a ‘good/bad time to invest’ are now 7pts (down 9.5pts in August). Roy Morgan Business Confidence results are based on 961 interviews with a cross section of businesses across Australia.

Monthly Business Confidence -- Australia

Roy Morgan Business Confidence - August 2016 - 108.6
Source:
Roy Morgan Business Single Source (Australia), December 2010-August 2016. Average monthly sample last 12 months = 1,026.

The fall in Business Confidence in August was mainly due to decreased confidence about the year ahead. Now 37.3% (down 4.1ppts) of businesses say they expect business to be better off financially than they are now while 20.1% (up 1.1ppts) believe they will be worse off. In addition 48.5% (down 5.8ppts) say the next 12 months is a ‘good time’ to invest in growing the business while 41.5% (up 3.7ppts) say it is a ‘bad time’.

While Business Confidence fell in August, ANZ-Roy Morgan Consumer Confidence was virtually unchanged in August – ending the month at 118.4 (August 27/28, 2016), up 0.4pts from the weekend of July 30/31, 2016 (118.0). However, Consumer Confidence has fallen in September to 114.3 (September 5/6, 2016).

Michele Levine, Chief Executive Officer, Roy Morgan Research says:

“Business Confidence fell by 7.5pts (-6.5%) in August to 108.6 – now at its lowest since Malcolm Turnbull became Prime Minister almost exactly a year ago, September 15, 2015. The close Federal Election result is already providing a challenge for the newly re-elected Turnbull Government; in early September the L-NP became the first Australian Government to lose votes on the floor of the House of Representatives in over 50 years.

“This month’s fall in Business Confidence came despite the RBA’s decision to cut Australian interest rates to a record low of 1.5% in early August and before last week’s better than expected economic growth figures showing Australian GDP increased by 3.3% over the 12 months to June 2016 – the fastest annual growth for four years.

“All five indices fell In August and now only 48.5% of Australian businesses (down 5.8ppts) believe the next 12 months will be a ‘good time to invest’ in growing the business – the lowest this indicator has been for more than four years since May 2012. In addition, only a bare majority of Australian businesses, 52.7% (down 2.5ppts), now expect ‘good times’ for the Australian economy over the next five years – a new record low for this indicator.

“Business Confidence in August fell significantly in all five mainland States and is clearly lowest in Western Australia – now well under 100 and the lowest for exactly a year. Bucking the trend slightly was a small rise in Tasmania which had negligible impact on the overall figure while Business Confidence in South Australia and New South Wales remained well above average for a second straight month.

“Australian businesses are yet to be convinced the re-elected Turnbull Government will be able to pass the important reforms to stimulate an Australian economy dealing with the end of the mining boom.”

 

For comments or more information please contact:

Norman Morris

Industry Communications Director

Office: +61 (3) 9224 5172

Mobile: 0402 014 474

Norman.Morris@roymorgan.com