Australian business confidence returns, with more businesses willing to invest in growth

Australian business confidence increased by 16.7 per cent in May, marking a significant recovery from its record low recorded in April due to the impact of COVID-19.

Australian business confidence increased by 16.7 per cent in May, marking a significant recovery from its record low recorded in April due to the impact of COVID-19.

The Roy Morgan Australian Business Confidence report found that, for the first time in 2020, the majoirty of Australian businesses (50.5 per cent) said they expect their business will be ‘better off’ financially this time next year compared to 18.7 per cent that expect to be ‘worse off’. 

In addition, more businesses, now 46.3 per cent (up 10.4ppts), said that the next year will be a ‘good time to invest in growing the business’ compared to 43.3 per cent (down 4.9ppts) that said it will be a ‘bad time to invest’.

Roy Morgan said that overall the May 2020 Business Confidence level is 24.5pts lower than both the level it was a year ago and the long-term average of 114.4. 

Keeping track of business confidence within relevant industries is important to magazine publishers in preparing budgets for the year ahead, predicting expected sales results, and developing responses to client objections when selling directly. 

The latest Roy Morgan Business Confidence results are based on 1,749 detailed interviews with a nation-wide cross-section of Australian businesses from each state and territory as part of the Roy Morgan Business Survey.

Roy Morgan CEO Michele Levine said business confidence has rebounded strongly in May from the record low in April but is still in negative territory well below the neutral level of 100 at only 89.9.

Roy Morgan Monthly Business Confidence – Australia.

State-by-state business confidence breakdown

The biggest increase in business confidence occurred in South Australia with an increase of 33.6pts (+48.9 per cent) to 102.5, and Western Australia (102).

Levine said that this has been driven by the lack of recent community-driven COVID-19 cases in the states: “Both states are opening up their economies at a faster rate than their counterparts in the east as community transmission of COVID-19 in these states has been non-existent for the last few weeks.” 

“However, for the Australian economy to really get moving, it is vital for the two largest states, New South Wales and Victoria, to improve their business confidence. The two states comprise about two-thirds of Australia’s $1.9 trillion economy and both continue to have low business confidence well below the neutral level of 100.” 

Business confidence in NSW sits at  91.5 and Victoria at 87.1, both around the same as the national average and below the neutral level of 100. NSW and Victoria have recorded the largest number of COVID-19 cases.

Business confidence in Queensland (80.9) and Tasmania (75.7) is below the national average. 

“Both states are heavily reliant on domestic tourism and with their borders closed to the larger states these industries will continue to suffer,” Levine said. 

Queensland Premier Annastacia Palaszczuk announced early in May that Queensland’s borders may remain closed for three or more months until at least September. 

Australian business confidence by industry

According to Roy Morgan’s latest report, business confidence in May was up significantly in many industries with six industries now having a positive rating above 100 compared to only two in April.

Australian business confidence by industry in May 2020.

The most confident industries are: 

  • Property and business services (114.7)
  • Public administration and defence (112.5)
  • Transport, postal and warehousing (109.2)
  • Education and training (107.2)
  • Manufacturing (104.8)
  • Agriculture (103.4).

Those within the property and business services industries will likely be further buoyed by this week’s announcement of the Federal Government’s $688 million ‘HomeBuilder’ scheme to stimulate renovations and the housing market.

For more information on Roy Morgan’s monthly Business Confidence report, click here

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