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Business confidence rebounds in January prior to the February RBA decision to drop rates

Source: Roy Morgan Business Single Source ( Australia ), December 2010 – January 2015. Average monthly sample last 12 months, n=1,145.

Roy Morgan Research’s Business Confidence survey in January was moving in a positive direction prior to the RBA decision in February to lower the cash rate. Business confidence in January increased by 9.6 points (up 8.3%) from December (to 114.9). This improvement was well above the average gains in January over the last four years of 3.5% points but it still remains a little below the five year average of 117.9 and well below the peak of 136.3 in October 2013 following the election of the new government.

These January figures are the result of 1,056 interviews with all types of businesses across Australia.

The increase in business confidence was across all components of the index but was mainly focused on an improvement in the economic outlook for the Australian economy over the next five years. This more optimistic outlook resulted in an increase in the number of businesses considering that the next twelve months would be a good time to invest in growing their business.

Monthly Business Confidence - Australia

australian business confidence in January 2015
Roy Morgan Business Single Source ( Australia ), December 2010 – January 2015. Average monthly sample last 12 months, n=1,145.

Norman Morris, Industry Communications Director, Roy Morgan Research, says:

“The improvement in business confidence in January was most likely as a result of less public discussion of the budget deficit problems, more publicity regarding the likelihood of an interest rate cut , lower fuel prices, lower Australian dollar and a decline in wages growth. The reduction in the official interest rate just announced by the RBA is likely to improve business confidence even further over coming months.

“The industries that it was hoped would make up for the decline in the iron ore price and mining investment have a mixed outlook and so are very unlikely to make up for the loss. Construction is showing some signs of improvement and currently has above average level of confidence but manufacturing is struggling and retail is marginally down. The most positive of the other major sectors are ‘finance and insurance’ and ‘professional, scientific and technical services’.

“The ANZ Roy Morgan Consumer Confidence in January averaged 112.6 and finished the month on 113.2. This result means that consumer confidence, although positive, is hovering around the long term average and this unlikely to contribute to an improvement in business confidence until a more positive trend is apparent.

“There are some signs that banks are stepping up their drive into the business market as conditions improve but in order to be successful they will need to increase the satisfaction level of their business customers. In December the banks’ business customer satisfaction level average was only 68.1% compared to their personal customers with 82.6%.”

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