New data shows that business confidence across Australia has slipped by 1 point in December to 105.9 after the Reserve Bank of Australia left interest rates unchanged at a 13-year high of 4.35 per cent for more than a year.
Despite the slip, business confidence remains in a positive rating above 100 for three months in a row – the first time this has been since the Albanese Government was elected in May 2022.
Businesses remain most confident about their personal circumstances and prospects with a plurality of 40.5 per cent saying they expect ‘good times’ for the business over the next 12 months compared to 21.1 per cent that expect ‘bad times’ – a net positive rating of 19.4 per cent.
Businesses are confident the next year is a ‘good time to invest in growing the business’ with 42.8 per cent saying it will be a ‘good time to invest’ compared to 37.7 per cent that say it will be a ‘bad time to invest’.
Business confidence is now 5.3 points below the long-term average of 111.2, but a large 20.1 points higher than the latest ANZ-Roy Morgan Consumer Confidence of 85.8 for January 13-19, 2025.
Compared to a year ago, business confidence in December 2024 was up 14.8 points compared to December 2023.
The index is up in all six states from a year ago and has been driven by large increases in New South Wales and Queensland with increases of at least 15 points.
The largest increase was in New South Wales, up by 25 points to 104.1 and now clearly in positive territory. The most consequential increase was in Queensland, up by 16.5 points to 105.9 after the Queensland election in late October resulted in the election of a Liberal National (LNP) coalition government. This is the first LNP Government in Queensland for nearly a decade.
There were increases in other states as well including Victoria, up 7.7 points to 108.2 – and now the highest business confidence of any state. South Australia grew by 5 points to 108.0 and Tasmania was up 3.4 points to 103.2.
The smallest increase was in Western Australia, up 1.2 points to 99.5, and now the only state with business confidence in negative territory below the neutral level of 100.
Over the last two months there were 12 industries with business confidence in positive territory above the neutral level of 100 led by education and training, mining, financial and insurance services, arts and recreational services, and construction.
Retail trade also held a net positive rating of 111.7 during the most important retailing period of the year – pre-Christmas sales.
The five least confident industries are led by electricity, gas, water and waste services on 60.1, well below any other industry. In second last place is wholesale trade at 84.4 and has averaged below the neutral level of 100 for over three years since late 2021.
Transport, postal and warehousing is at 89.2, which is its highest level of confidence all year having averaged only 75.2 during 2024 – more than 10 points lower than any other industry.
Roy Morgan CEO Michele Levine said while the RBA decided not to cut interest rates in 2024, there are signs that interest rates will be cut this year. Some economists are projecting as early as next month.
“The latest ABS monthly inflation estimate for November 2024 shows annual inflation at only 2.3 per cent,” Levine said.
“The reduction in the official ABS inflation estimates during 2024 is building expectations amongst many, including businesses, that the Reserve Bank will soon be embarking on a new cycle of interest rate cuts this year – and these hopes have helped to support and increase business confidence in recent months.”