Roy Morgan Business Confidence was 95.8 across Australian businesses in February 2023 (down 10.6pts since January), with the retail sector among the bottom five.
Retail business confidence was at 94.0 in February, joining construction (87.9), agriculture (86.9), electricity, gas and water (83.3), and finance and insurance (71.5).
In comparison, the top five sectors are education and training (122.1), public admin and defence (121.1), accommodation and food services (119.0), manufacturing (117.4), and recreation and personal (117.1).
Roy Morgan cited the RBA’s ongoing interest rate hikes as a major factor in the decline of business confidence.
The research firm said the RBA’s decision to increase interest rates in February and March followed the highest Australian inflation figures for 32 years for the December quarter 2022 at an annual rate of 7.8%. Official interest rates are now at their highest for over a decade since early June 2012 (3.75%).
The fall in business confidence in February reversed the increase of 10.4pts in January 2023, and was reportedly driven by rising pessimism about prospects for the next 12 months both for the performance of the Australian economy and the personal prospects of the business.
Looking forward, businesses’ views on the performance of the Australian economy over the next year worsened with 59.3% (up 11.1ppts) of businesses expecting ‘bad times’, while only 39.1% (down 10.2ppts) expect ‘good times’.
Businesses are also less confident about their own circumstances over the next 12 months with 41.2% (down 5.5ppts) expecting to be ‘better off’ financially this time next year compared to 28.1% (up 7.3ppts) expecting to be ‘worse off’.
Business confidence is now 16.8pts below the long-term average of 112.6 but still 15.9pts higher than the latest ANZ-Roy Morgan Consumer Confidence of 77.0 for March 6 March 12, 2023.
The decline in confidence is more noted in micro and small businesses with under 20 employees, with medium and large businesses above the neutral level of 100 in comparison.
Large businesses now have a business confidence of 117.3, down 15pts, and medium businesses with between 20-199 employees have dropped 22.2pts to 112.2.
Small businesses of 5-19 employees saw the largest drop of 32pts to 98.4, while micro businesses of under five employees dropped 24pts to 95.1.
“The vastly different levels of confidence for businesses of a variety of sizes shows that the current economic conditions, including high inflation and rapid interest rate increases, are having a considerably different impact on businesses depending on several factors – including size,” Roy Morgan CEO Michele Levine said.
Levine added that there was negative movement across the index, but the largest contribution was a lack of confidence about the performance of the Australian economy.
“On a state level, business confidence is soaring in Western Australia at 134.2 and marginally in positive territory in Tasmania at 101.1 – but below the neutral level of 100 in all other States.
“Business Confidence is just below neutral at 98.1 in New South Wales and well below neutral in Queensland (92.0), South Australia (90.1) and lowest of all in Victoria (81.2).”