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Business Confidence up slightly in October to 116.2 (up 1.1%) on the back of renewed strength in primary industries Agriculture & Mining

Source: Roy Morgan Business Single Source (Australia), December 2010-October 2016. Average monthly sample last 12 months = 1,021.

Roy Morgan Research’s Business Confidence rose 1.1% to 116.2 in October. The small rise in Business Confidence occurred even though the Australian All Ordinaries fell during October – the All Ordinaries ended October at 5,402.40 (down 122.8pts from September 30, 2016). However, this fall was concentrated in the last week of the month (the All Ordinaries lost 120.9pts between October 25-31) and has fallen further in early November – now at 5,330.9 (November 7, 2016).

This month’s small rise in Business Confidence means Business Confidence is now just below the 6yr average (116.6) and slightly below the ANZ-Roy Morgan Consumer Confidence October rating of 118.5.

Looking forward indications are mixed with net expectations of business performance over the next 12 months down 1.3pts to 20pts in October however net views of whether the next 12 months will be a ‘good/bad time to invest’ are now 18.2pts (up 3.8pts). Roy Morgan October Business Confidence results are based on 1,038 interviews with a cross section of businesses across Australia.

Monthly Business Confidence -- Australia

Roy Morgan Business Confidence - October 2016 - 116.2

Source: Roy Morgan Business Single Source (Australia), December 2010-October 2016. Average monthly sample last 12 months = 1,021.

The small rise in Business Confidence in October was mainly due to increased confidence about the Australian economy in the year ahead. Now 53.7% (up 1.2ppts) of businesses say they expect Australia to have good times financially in the next 12 months while 38.5% (down 4.7ppts) expect to have bad times. In addition 54.9% (up 0.6ppts) say the next 12 months is a ‘good time’ to invest in growing the business while 36.7% (down 3.2ppts) say it is a ‘bad time’.

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

“Business Confidence increased for the second straight month, up by 1.3pts (+1.1%) in October to 116.2. This is the highest Business Confidence has been since the Federal Election in July when the Turnbull Government was returned with a majority of only one seat.

“Analysing the movement of Business Confidence across the States in October shows a mixed picture with Business Confidence down in Australia’s largest States of New South Wales (down slightly) and Victoria (now the lowest in Australia) and also down in South Australia – which was hit by an unprecedented State-wide blackout in late September which is obviously a huge concern for businesses considering investment in the State.

“In contrast, Business Confidence was up significantly in the two mining States of Queensland and Western Australia – both of which have been boosted increasing commodities prices – a firming price of iron ore (WA) and the surging prices of coal (Queensland). Business Confidence also strengthened in Tasmania.

“In terms of industries, the most confident industries in October were the primary industries of Agriculture, forestry and fishing, Mining – which has significantly recovered from lows earlier in 2016, Education and training, Accommodation and Rental, hiring and real estate services – all significantly above the national average.

“Industries lagging in confidence in October include Transport, postal and warehousing, Arts and recreational services, Personal, repair and other services and the utilities of Electricity, gas, water and waste. It is no surprise to see lower business confidence in the Electricity industry given the problems with the South Australian power system and the well-anticipated recent decision to close Victoria’s Hazelwood power stations (responsible for up to 25% of Victorian baseload energy demand).

“Turning to the political scene, businesses will be keeping a close eye on the functioning (or non-functioning) of the Australian Senate. The ongoing legal cases – both sent to the High Court to be resolved – surrounding recently resigned South Australian Family First Senator Bob Day and controversial Western Australian One Nation Senator Rod Culleton threaten to make the Senate even more ‘unwieldy’ than at present, or alternatively present an opportunity for the Senate to function more efficiently in 2017 than it has for much of 2016.

“Assuming both cases will soon be resolved Prime Minister Turnbull may find his Government in an unexpectedly strong position in the New Year to tackle the largest challenge the Australian economy faces – which is creating enough new jobs for Australia’s large ‘army’ of unemployed and under-employed – now at 2.103 million (16.2%) of Australians in September 2016 according to the latest Roy Morgan Research employment estimates.”

For comments or more information please contact:

Norman Morris
Industry Communications Director
Office: +61 (3) 9224 5172
Mobile: 0402 014 474