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Business confidence down despite RBA cut

Roy Morgan Research’s Business Confidence February results have revealed a decline, despite the RBA’s move to lower the cash rate to 2.25 per cent.

The latest Business Confidence survey saw February experience a drop of 9.2 points, 0.8 per cent lower from the 105.7 points registered in January. The February result reveals a level of confidence that is below pre-election readings and 22.5 per cent under the 136.3 peak seen in October 2013.

“The decline in business confidence during February was most likely a result of continued uncertainty regarding the level of the budget deficit, difficulties getting elements of the budget expenditure cuts past the Senate, wrangling over leadership, negative employment outlook, global economic issues (including much focus on Greece and China), as well as a general ambivalence in Australian consumer confidence,” Roy Morgan Research Industry Communications Director Norman Morris said, adding that the RBA cut could be seen as a sign of the bank’s concern for Australia’s economic future.

Mr Morris said confidence in the construction industry was below average, manufacturing saw a small rise, and retail remains average.

“The most positive major sectors are ‘finance and insurance’, ‘rental, hiring and real estate’, ‘information media and telecommunications’ and ‘personal, repair and other services.’ ”

The poor results were attributed to an overall deterioration in Australia’s economic forecast for the next five years. Plans of investing in growth has also dropped, down to what Mr Morris says is the lowest level since September 2012.

“With a big drop in investment by the mining industry and the less positive outlook by other sectors for growth for the next five years, this will be a major concern for state and federal governments,” Mr Morris said.

“Less confident business borrowers are likely to lead to more cautious lenders despite the fact that there are some signs that banks are stepping up their drive into the business market. For banks to be successful, they will need to achieve more of a customer focus than at present: their business customer satisfaction in January was only  67.7% compared to 82.9% for their personal customers. The extent to which banks pass on interest rate cuts to business is very likely to impact satisfaction levels and, more importantly, their intention to borrow — which was really the purpose of the RBA cut in rates to begin with.”

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Guillermo Troncoso

Guillermo Troncoso

Guillermo is the Editor of Dynamic Business and Manager of film &amp; television entertainment site ScreenRealm.com. Follow him on <a href="https://twitter.com/gtponders">Twitter</a>.

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