“The decline in business confidence in October was due largely to a big drop in the feeling that the next 12 months would be positive for the Australian economy and as a result it would not be a good time to invest in business expansion. Economic growth depends to a large extent on increased business investment and in October the proportion of businesses considering that the next 12 months would be a good time to invest in growing their business declined to only 52%, well down on September (61%) and below the pre-federal election level seen in July (55%) and August (56%) 2013.
“As would be expected from this loss of confidence, the proportion of businesses now feeling that they will be better off financially in the next 12 months has fallen to only 33%, well down on the 47% level seen in January this year.
“Confidence in the key areas of retail, construction and manufacturing, which were seen as making up for a slowdown in the mining industry, remained subdued although the construction industry is showing some tentative signs of an improvement in outlook.
“The RBA statement on the economy during the month was also fairly cautious and although expecting moderate growth, the decline in investment in the mining sector was seen as an issue with the potential to negatively impact on growth to place it a little below trend.
“Unemployment (Roy Morgan Unemployment - 9.1%, 1.09 million and Under-employment - 9.3%, 1.12 million) remains a major problem and doubt created by the highly publicised ABS data revisions during the month is likely to have created further uncertainty in the business community about the real state of the economy.
“Although business has shown a decline in confidence during the month, it is now almost identical to the level of the ANZ-Roy Morgan Consumer Confidence index that finished the month on 114.6 compared to business with 114.9. The movements in both the business and consumer confidence are likely to remain volatile with recent world social, political and economic events being likely to impact at anytime.
“A challenge for banks when lending to business, particularly if demand is reduced, will be to improve their dealings with customers as shown by Roy Morgan Business Bank Satisfaction, which is currently well below the satisfaction level of the banks’ personal customers.”