Roy Morgan Business Confidence was 108.2 in January 2025, up by 2.3 points from December 2024, as the prospects of interest rate cuts in the next few months increased.
Following the increase in January, business confidence has now had a positive rating above 100 for four months in a row – the first time this has happened since the Albanese Government was elected in May 2022.
Businesses are confident about the year ahead with a rising plurality of 43.2 per cent (up 2.7ppts) expecting ‘good times’ for the business over the next year compared to 15.1 per cent (down 6ppts) that expect ‘bad times’ – a net positive rating of 28.6 per cent, the highest net positive rating for three years since February 2022.
Businesses are also confident about the Australian economy’s performance over the next year with a clear majority of 58.6 per cent expecting ‘good times’ for the economy compared to only 35.8 per cent that expect ‘bad times’ – a net positive rating of 22.8 per cent.
This comes as new data from the Australian Bureau of Statistics (ABS) shows that official inflation has dropped to an annual rate of 2.4 per cent late last month, below the mid-point of the Reserve Bank of Australia’s target range of 2-3 per cent.
Roy Morgan CEO Michele Levine said the 2.4 per cent inflation rate is the lowest rate of inflation for three years since the March Quarter 2021 (1.1 per cent).
“The closely watched ‘trimmed mean’ measure of inflation – which strips out volatile items such as food, energy and electricity – dropped to 3.2 per cent, and a quarterly rate of only 0.5 per cent,” Levine said.
“The latest ABS inflation estimates are within range of the Reserve Bank’s target range of 2-3 per cent over the economic cycle and have many media commentators and economists predicting that interest rates will be cut at the Reserve Bank’s interest rate meeting next week for the first time since November 2020.”
Mining, education and training, health care and social assistance, and arts and recreational services are the four most confident industries during December 2024 January 2025, with the first two at 142.3 and 125.2 respectively.
Retail in particular joined 13 industries with business confidence above the neutral level of 100 over December to January, with a rating of 114.7. Following the top four is information media and telecommunications, with that followed by financial and insurance services, rental, hiring and real estate services, retail, construction, public administration and safety, professional, scientific amd technical services, administrative and support services, and finally accommodation and food services.
The least confident industry is agriculture, forestry and fishing on only 84.3, and also the industry with the lowest average business confidence over the last two years of only 81.7.
The industry with the second lowest score is electricity, gas, water and waste services on 92.2 and the lowest average business confidence since the beginning of 2022 of only 84.
Other industries with low confidence include transport, postal and warehousing on 94.1, manufacturing on 94.4 and wholesale trade on 96.5.
Business confidence is just 2.1 points below the long-term average of 110.3, but a large 19.7 points higher than the latest ANZ-Roy Morgan Consumer Confidence of 86.7 for February 3-9, 2025.