Business confidence weakens

The Roy Morgan Business Confidence Index dropped 2.8% to a nearly nine-year low in January, a level that has only been lower in the last decade when it briefly dipped in July 2011,during the height of the European sovereign debt crisis.

Driving the fall is a broad-based decline in sentiment about business performance  with only 34.5% of business leaders saying their business is ‘better off financially’ now compared to a year ago. However, 44% expect their business to be ‘better off financially’ this time next year.

Roy Morgan CEO Michele Levine said the decline in business confidence in January followed a month of negative headlines as Australia dealt with bushfires and, more recently, the threat of the new coronavirus that has rattled global markets.

“At present the biggest factor surrounding the viral outbreak is the uncertainty about how serious the situation is and whether its economic impact on China and countries such as Australia will be long-lasting or temporary,” she said. “Unfortunately, it is impossible to accurately estimate at this point although one immediate result is an increase in economic uncertainty which has a negative influence of future economic expectations looking forward.”

While business confidence in January is down on a year ago for businesses of all sizes the most pronounced decline is for large businesses with 200+ employees. Medium businesses also experienced a significant drop in confidence but are again the most confident businesses by size. Confidence for small businesses with 5-19 employees is virtually unchanged while it has declined for micro businesses with fewer than five employees.

WA is now the most confident state for business ahead of Queensland and NSW. In contrast the index remains below the neutral level for both Victoria and Tasmania and has dropped back into negative territory for South Australia.

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