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Business Confidence gives soft ‘thumbs down’ to Federal Budget

Source: Roy Morgan Business Single Source (Australia), December 2010 – May 2017. Average monthly sample over the last 12 months =1,006.
Business Confidence in Australia fell 2.8pts (-2.4%) to 113.8 in May, according to the Roy Morgan Business Single Source survey. The fall in Business Confidence came during the month Treasurer Scott Morrison handed down a Federal Budget which included plans to increase taxation on Australian banks and coincided with the Australian All Ordinaries falling 186.3pts (-3.1%) to 5,761.3.

Monthly Business Confidence -- Australia

Roy Morgan Business Confidence - May 2017 - 113.8
Source: Roy Morgan Business Single Source (Australia), December 2010 – May 2017. Average monthly sample over the last 12 months =1,006.

Business Confidence hit by business-specific financial indicators

The business specific financial indicators drove this month’s fall in Business Confidence back to the pre-Budget March rating of 113.8.

  • In May 44.4% (down 4.3ppts) of Australian businesses expected to be ‘better off’ financially this time next year compared to 22.6% (up 2.9ppts) that expected to be ‘worse off’ – a net negative movement of 7.2pts.

  • Also fewer Australian businesses, 39% (down 3.2ppts), said the business is ‘better off’ financially than a year ago while 32.9% (up 3.6ppts), said the business is ‘worse off’ – a net negative movement of 6.8pts.

  • In terms of the Australian economy sentiment was little changed with 53.2% (up 0.4ppts) expecting ‘good times’ for the economy over the next year and 50.5% (unchanged) expecting ‘good times’ for the economy over the next five years.

Michele Levine, CEO Roy Morgan Research, says the Federal Budget has had little impact on overall Business Confidence, but hopes of a Budget stimulus have been disappointed:

“Business Confidence fell 2.8pts (-2.4%) in May to 113.8 returning to the pre-Budget rating of 113.8 in March. History shows that businesses are rarely satisfied by Federal Budgets with Business Confidence now falling in six out of the last seven years in May.

“Despite the fall, Business Confidence remains slightly higher than the weekly ANZ-Roy Morgan Consumer Confidence Rating now at 112.9 after three straight increases.

“Overall Business Confidence has held up well this year despite clear headwinds with GDP growth in the March quarter being estimated by the ABS at only 0.3% seasonally adjusted and an annual growth rate of only 1.7% - the lowest since June quarter 2011 (1.4%). Business Confidence has barely changed from December 2016 when Business Confidence was 114.1.

“Attitudes towards the broader Australian economy were virtually unchanged in May and it was the business specific indicators that drove the fall with a net movement of -6.8pts in how Australian businesses compare financially to a year ago and a net movement of -7.2pts for how Australian businesses expect to be financially this time next year.

“Analysis by State shows a mixed picture with increases in Victoria, Western Australia and Queensland – now with the highest Business Confidence in the nation not enough to offset significant falls in New South Wales, South Australia and Tasmania. Australia’s two smallest States have also fallen to their lowest figures in over a year.

“Industries with high Business Confidence are led by Agriculture, forestry & fishing which is at its highest since surveying began in 2011. The confidence of Mining businesses has also improved strongly in 2017, now returning to levels last seen early in 2015. Education & training and Accommodation & food services are also showing strong Business Confidence.

“Only two industries have a less than positive Business Confidence in May with Australia’s Manufacturing industry facing the impending closure of Australia’s automotive manufacturing in less than six months and Wholesale trade dipping slightly in May into negative territory.”

Roy Morgan May Business Confidence results are based on 950 interviews with a cross-section of Australian businesses. Business Confidence is still clearly below the 7yr average (116.4).

For comments or more information please contact:

Michele Levine
Office: +61 (3) 9224 5215
Mobile: 0411 129 093