In June 2022 Roy Morgan Business Confidence fell by 2.9pts (-2.9%) to 97.3. This was the second straight monthly fall and the first time the index fell for two straight months since the long lockdowns in New South Wales and Victoria in August 2021.
The fall in Business Confidence came after the ALP won last month’s Federal Election ending nearly nine years of Coalition Government. ALP Leader Anthony Albanese became only the fourth Labor leader to lead his party to victory from Opposition since World War II.
There was also a second straight increase in interest rates in June with the RBA increasing official interest rates by 0.50% to 0.85% - the largest monthly increase in interest rates for over 20 years since February 2000 and the largest two-monthly increase (+0.75%) to interest rates for nearly three decades since 1994.
The monthly decline was driven by a fall in confidence about the prospects for the Australian economy over the next year with 38.7% of businesses now expecting ‘good times’ for the economy over the next year, down 6.4ppts from a month ago.
However, despite the monthly fall, businesses are still broadly positive about their own prospects with a rising plurality of 45.4% (up 1.6ppts) saying the next 12 months is a ‘good time to invest in growing the business’ and a plurality of 41.5% (up 0.2ppts) expecting the business to be ‘better off’ next year.
Business Confidence in June 2022 dropped to its lowest since September 2020 (85.6) during Victoria’s second wave of COVID-19 and is now well below the long-term average of 113.5 but remains significantly higher than the latest ANZ-Roy Morgan Consumer Confidence of 81.7 for June 13-19, 2022.
Roy Morgan Monthly Business Confidence -- Australia
Source: Roy Morgan Business Single Source, Dec 2010-June 2022. Average monthly sample over the last 12 months = 1,409.
Business Confidence plunges from a year ago in all States – down by over 30pts nationally
Business Confidence in June is down by 31pts (-24.1%) from a year ago to 97.3 reaching its lowest point since Victoria’s second wave of COVID-19 in September 2020 (85.6). The Index peaked just over a year ago in May 2021 at 129.3 and has now fallen for two straight months for the first time this year.
The index has dropped in all six States by at least 20pts from a year ago and is now highest, and above the national average, in NSW at 101.3, although down a large 35.8pts (-26.1%). NSW is now the only State with Business Confidence above the neutral level of 100.
Business Confidence in WA dropped by 43.8pts (-30.7%) to 98.8 over the past year. This is the largest drop of any mainland State although the index remains marginally above the national average in WA. The swing of 10.5% to the ALP at the Federal Election in May was larger in WA than any other State and was crucial in delivering a majority Government for new Prime Minister Anthony Albanese.
Business Confidence in the other States has fallen significantly from a year ago and is now below the national average in Tasmania, down 46.6pts (-32.6%) to 96.1, in South Australia, down 37pts (-28.1%) to 95.0, in Queensland, down 26.7pts (-22.1%) to 94.1 and is now lowest of all in Victoria at only 90.6, a decline of 22.2pts (-19.7%) on a year ago.
Business Confidence by State in June 2021 vs June 2022
Source: Roy Morgan Business Single Source, June 2021, n=1,343, June 2022, n=1,295. Base: Australian businesses. *Tasmanian Business Confidence is measured over three months: April-June 2021 cf. April-June 2022.
Business Confidence for ‘Large Businesses’ falls more from a year ago than for smaller businesses but ‘Micro Businesses still have the lowest confidence
A look at businesses by turnover shows big declines across the board for businesses of all sizes over the last year. ‘Large businesses’ with a turnover of over $50 million have experienced the biggest decline in Business Confidence, down by a massive 57.5pts (-35.5%) to 104.5.
However, it is ‘Micro businesses’ with a turnover of less than $1 million that are pulling the overall index down with a Business Confidence of only 95.6, a drop of 30.8pts (-24.4%) from a year ago. ‘Micro businesses’ are the only segment by turnover that has a Business Confidence in negative territory below the neutral level of 100. It is important to understand that ‘Micro businesses’ do comprise the largest segment with over 2 million businesses under this classification.
The smallest decline in Business Confidence from a year ago was for ‘Small businesses’ with a turnover from $1-$5 million with a rating in positive territory at 106.9, a decline of 30.4pts (-22.2%).
Clearly the most confident sized businesses are ‘Medium businesses’ with a turnover from $5-$50 million and a Business Confidence of 115.5, but still down 37.9pts (-24.7%) from a year ago. Business Confidence for both ‘Small businesses’ and ‘Medium businesses’ by turnover has not dropped below the neutral level of 100 for nearly two years since September 2020.
Business Confidence by annual turnover size: June 2021 vs. June 2022
Source: Roy Morgan Business Single Source, June 2021, n=1,343, June 2022, n=1,295. Base: Australian businesses.
Businesses are positive about their own prospects but worried about the Australian economy’s performance over the next year
- An unchanged plurality of businesses, 38.6%, said the business is ‘better off’ financially than this time a year ago while just over a third, 33.8% (up 1.3ppts), said the business is ‘worse off’;
- Businesses are still broadly positive about their own prospects over the next year with 41.5% (up 0.2ppts) of businesses, expecting the business will be ‘better off’ financially this time next year, while just over a quarter, 25.6% (up 5.5ppts) expect the business will be ‘worse off’ (the highest figure for this indicator for nearly two years since September 2020);
- However, an increasing majority of businesses, 58.6% (up 6.8ppts) expect ‘bad times’ for Australia’s economic performance over the next year (the highest figure for this indicator for nearly two years since September 2020) while well under half, 38.7% (down 6.4ppts), expect ‘bad times’ (the lowest figure for this indicator for nearly two years since September 2020);
- Businesses are overall slightly less negative on the longer-term outlook for the Australian economy with 39.6% (up 1ppt) of businesses expecting ‘good times’ for the Australian economy over the next five years while a virtually unchanged majority of 54.7% (up 0.3ppts) expect ‘bad times’ over the next five years (the highest figure for this indicator for nearly two years since September 2020);
- In some more positive news, importantly this month a rising plurality of businesses, 45.4% (up 1.6ppts) say the next 12 months will be a ‘good time to invest in growing the business’, while 44.5% (down 2.8ppts) said it will be a ‘good time to invest’ in growing the business.
Michele Levine, CEO of Roy Morgan, says Business Confidence fell for a second straight month in June as the ALP’s victory at the Federal Election in late May failed to provide an immediate boost to businesses dealing with consecutive interest rate increases in the last two months:
“Roy Morgan Business Confidence fell for a second straight month in June, down 2.9pts to 97.3 and is now down 15.7pts (-13.9%) since April. Compared to a year ago, when the States of NSW and Victoria were on the verge of months long lockdowns, Business Confidence has collapsed by 31pts (-24.2%).
“The reading for June is the first fully under the new ALP Government led by Anthony Albanese since the Coalition lost power after nearly nine years in office. The biggest issues during the month were related to the energy ‘crisis’ along Australia’s east coast, the growing challenge of inflation and the RBA’s decision to increase interest rates to deal with the threat of inflation.
“The RBA increased interest rates by 0.25% in May and by 0.50% in June, the largest two-monthly increase in interest rates for nearly three decades since 1994. The RBA has also signalled it is set to continue increasing interest rates over the next few months which will lead to further increases in borrowing costs for businesses and clearly have a negative impact on general economic growth.
“Another direct impact of the increasing level of inflation is the pressure on wages to increase and keep pace with the level of inflation. In mid-June the Fair Work Commission announced a rise in the minimum wage of 5.2%, or around $40 a week, taking it to around $813 a week ($21.38 per hour). This was the largest increase in the minimum wage for many years and directly impacts around 2.7 million Australians including many in the retail and hospitality industries.
“One of the factors driving inflation higher and leading to the RBA’s decision to increase interest rates is the increasing price of energy including oil, gas and coal. The rising price of oil is reflected directly in the increasing petrol price – now back over $2 per litre despite the cut to the petrol excise in half (25 cents per litre) by former Treasurer Josh Frydenberg in late March.
“The east coast energy ‘crisis’ was caused by a multitude of factors but is related to the increasing prices of energy inputs such as gas and oil and a lack of supply being made available to the Australian market and thus forcing prices to increase. Although the immediate threat to energy supplies and reliability appears to have receded the risk is still there that it will return in the months ahead as we head towards the summer months when electricity usage is at its highest.
“Clearly the rising prices of different forms of energy, as well as questions about the reliability of energy supply, is a large concern for businesses that rely on consistent supplies of affordable energy to maintain a profitable business. The new ALP Government’s ability to control, and resolve, issues relating to the energy supply over the next few months will be a big factor in whether overall Business Confidence can stabilise or will continue to decline.
“On an industry level Business Confidence over the last two months was over 10% higher than the national average for Information Media & Telecommunications (121.9), Accommodation & Food Services (119.3), Transport, Postal & Warehousing (117.6), Property & Business Services (112.3) and Agriculture (110.1).
“At the other end of the scale Business Confidence is now lowest and well under the national average for Professional, Scientific & Technical Services (94.0), Administrative & Support Services (93.3), Construction (88.4), Public Administration & Defence (84.0) and lowest of all for Retail (81.0).”
The latest Roy Morgan Business Confidence results for June are based on 1,295 detailed interviews with a cross-section of Australian businesses from each State and Territory. Detailed findings are available to purchase on a monthly or annual subscription as part of the Roy Morgan Business Confidence Report.
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Margin of Error
The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.
|Sample Size||Percentage Estimate|
|40% – 60%||25% or 75%||10% or 90%||5% or 95%|