Roy Morgan Business Confidence has dropped 3.5 points from February to March 2024, and is the first decline after three months of increases over the summer period.
Driving the index lower in March was less confidence about the performance of the Australian economy over the next year and next five years, Roy Morgan reported.
Now 43.9 per cent (down 3.7ppts) of businesses expect ‘good times’ for the economy over the next year and just 38.9 per cent (down 4.3ppts) expect ‘good times’ over the next five years.
In contrast to the economy more broadly, businesses have grown significantly more confident about their own prospects over the year ahead with 49.6 per cent (up 4.8ppts) expecting to be ‘better off’ this time next year - the highest rating for this indicator for over two years since February 2022.
Retail did not feature in either the top five most confident sectors or the least five confident sectors.
Accommodation and food services remains the most confident industry during the holiday months, ahead of education and training, while the least confident industry is transport, postal and warehousing.
Agriculture is the industry which has had low business confidence for longer than any other and now at 86.2, down only 3.3pts from a year ago. Confidence in the agriculture industry - which includes cotton and wool production - has been in negative territory below the neutral level of 100 since September 2022 and has averaged only 82.2 since then.
Roy Morgan CEO Michele Levine said the drop in confidence comes despite the Reserve Bank leaving interest rates unchanged last month. However, she added that business confidence is up by 4.4 points from a year ago.
“Despite the decline in business confidence, there was good news for businesses in March with the latest ABS monthly inflation figures for the 12 months to February 2024 showing inflation unchanged at 3.4% for a third straight month – now just above the Reserve Bank’s target range of 2-3%.
“In addition, the Reserve Bank left interest rates on hold for a third straight meeting in mid-March and the plunge in the official inflation numbers from a year ago suggest that the next direction for interest rates over the next few months is set to be down.
“On a State-by-State basis Business Confidence is in positive territory in only two States – South Australia (109.3) and Western Australia (106.3). Both States have been in positive territory every month so far this year.
“In contrast, Business Confidence is now in negative territory in the four other States of Tasmania (97.3), New South Wales (96.4), Victoria (94.7) and Queensland (93.3). Business Confidence has been below the neutral level of 100 in Queensland for over a year since January 2023.
“Although the next few months look tough for the Australian economy, there is considerable hope of a stronger end to the year with the potential for interest rates to be cut, inflation coming down, and the modified stage 3 tax cuts increasing consumer’s take home pay from mid-year.”