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Business Confidence down in August to 114.4 as high energy prices a threat to economic growth

Source: Roy Morgan Business Single Source, Dec 2010–Aug 2017. Average monthly sample over the last 12 months=1,000.

In Australia Business Confidence fell 2.6pts (-2.2%) to 114.4 in August, according to the Roy Morgan Business Single Source survey following extensive discussions about the high cost of energy in Australia. However, businesses remain largely positive with a majority of businesses expecting to be ‘better off’ financially this time next year (51.7%) and most businesses say now is a good time to invest in growing the business (54.9%).

The fall in Business Confidence was driven by large falls in confidence in several industries including Manufacturing, Electricity, Gas, Water and Personal, repair and other services.

The fall in Business Confidence matches a weakening weekly ANZ-Roy Morgan Consumer Confidence Rating which decreased by 2.7pts (-2.4%) to a monthly figure of 112.0 in August.

Monthly Business Confidence -- Australia

Roy Morgan Business Confidence - August 2017 - 114.4Source: Roy Morgan Business Single Source, Dec 2010–Aug2017. Average monthly sample over the last 12 months=1,000.

Business Confidence down as more businesses say they are worse off financially than last year and are worried about Australia’s economic situation over the coming year

  • Business Confidence decreased in August on the back of falling expectations of the Australian economy with a more businesses now expecting ‘bad times’ for the economy in the short-term – 47.1% (up 5.7ppts) cf. 44.4% (down 8.3ppts) expecting ‘good times’;

  • Expectations for their own businesses are mixed with 41.5% (down 3ppts) saying the business is ‘better off’ financially than this time last year however 51.7% (up 4.3ppts) expect the business to be ‘better off’ financially this time next year;

  • In regard to growing the business now 54.9% (down 1.3ppts) of businesses say the next 12 months will be a ‘good time to invest’ compared to only 35.8% (down 0.1ppts) that say it will be a ‘bad time to invest’.

Michele Levine, CEO Roy Morgan Research, says Business Confidence remains elevated above Consumer Confidence but both have fallen slightly in August as Australia’s high energy prices become a key issue:

“Business Confidence fell 2.6pts (-2.2%) in August to 114.4, although it remains clearly above its level of a year ago in August 2016 (108.6). Both Business Confidence and Consumer Confidence (down 2.7pts to 112.0) fell by similar amounts during the month as Australia’s high energy prices have become a major topic of discussion in Australia.

“Australia’s electricity and gas prices have increased in recent years and the impact is beginning to be felt on the bottom line for businesses. The closure of Victoria’s largest power station, Hazelwood, earlier in 2017 took almost 25% of Victoria’s power generation off-line permanently and there are concerns the national grid will be under unprecedented strain when temperatures rise in the upcoming Summer.

“Combining the uncertainty surrounding Australian electricity market with the geo-political tensions generated in North-East Asia with North Korea engaging in several provocative acts including firing ballistic missiles over their neighbours including Japan, it is hardly surprising that Australian Business Confidence during August was subdued.

“Looking at the Australian States shows mixed fortunes for the month with small rises in Australia’s two largest States of New South Wales and Victoria not enough to offset falls in Western Australia, South Australia and Queensland – which despite a drop still has the highest Business Confidence of the mainland States.

“As noted earlier in the week, despite assertions to the contrary – Business Confidence in South Australia remains higher than the national average where it has been for the past 12 months – for full details view here.

“Analysing Business Confidence by industry shows lagging industries again include Electricity, Gas, Water & Waste, Personal, repair & other services and Manufacturing which faces a big couple of months as the last Toyota car will be manufactured on Tuesday October 3, 2017 (Altona, Victoria) and the last Holden car is set to roll off the production lines just over two weeks later on Friday October 20, 2017 (Elizabeth, South Australia).

“Industries performing well in August include Mining – which has enjoyed a substantial rise in prices for many key commodities throughout 2017, Agriculture, forestry & fishing, Health care and social assistance, Wholesale trade and Administration & support services.”

Roy Morgan August Business Confidence results are based on 855 interviews with a cross-section of Australian businesses. Business Confidence is now below the 7yr average (116.3).

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