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Six-month run in negative territory means economic pessimism has hit pandemic levels, Roy Morgan survey finds.
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NSW leads plunge in business confidence to record lows
09 August 2023
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10 minute read
Business confidence has plummeted to pandemic levels led by a steep decline in NSW, according to the latest Roy Morgan survey, and nearly two-thirds of business owners expect economic conditions to get worse.
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The findings were reinforced by a decline in the Westpac consumer sentiment index and ABS data yesterday revealing a slowdown in household spending growth.
The Roy Morgan survey showed a 25 point decline in NSW business confidence compared with a year ago, to 79.9 points in July, helping to drive the national index down to a three-year low of 87.5 points.
The survey said business confidence had now spent six consecutive months in the index’s negative zone in a decline unmatched over the past decade except during COVID-19.
CEO Michele Levine said the result revealed “the lowest business confidence in NSW since the early days of the pandemic in April 2020” and business owners in the state were pessimistic about their own prospects.
“Business confidence is 8 points (-8.3 per cent) lower than it was a year ago in July 2022, just after the RBA started raising interest rates,” she said.
“A look at the key indicators shows that businesses are still broadly confident about their own circumstances with 37.7 per cent expecting the business will be ‘better off’ financially this time next year compared to 27 per cent who say they will be ‘worse off’ financially.”.
“The real concern businesses have is about the fortunes for the Australian economy going forward. Nearly two-thirds of businesses expect ‘bad times’ for the Australian economy over the next year, 65 per cent, and over the next five years 62.8 per cent – a new record high figure for this indicator.
“On a state-by-state basis business confidence continues to fly high in only one State – Western Australia – at 113.9 in July – and up 6.8 points (+6.4 per cent) on a year ago.”
“The mining-dependent state has had consistently higher business confidence than other states in recent years as the mining industry has outperformed other industries.”
The RBA’s decision last week to hold interest rates for a second month in a row also failed to lift consumer sentiment, which dipped 0.4 per cent this month according to the Westpac-Melbourne Institute.
Westpac senior economist Matthew Hassan said that pressures on family finances and concerns about interest rates weighed heavily on consumers.
“The August survey detail pointed to little or no impact from the RBA’s decision to pause,” he said. “The lacklustre response may be partly due to the RBA’s continued warnings that further tightening may still be required.”
“Consumer nerves about the interest rate outlook are likely being compounded by ongoing cost-of-living pressures.”
Consumers have responded by curbing purchases with ABS data for June showing the slowest growth in household spending since February 2021.
ABS head of business indicators Ben Dorber said, “spending on discretionary goods and services was down for the third straight month, falling 0.7 per cent over the year, as households adjust to cost of living pressures”.
“Non-discretionary spending rose 4.2 per cent, however the growth rate has been slowing since January, when it reached 21.0 per cent,” he said.
Spending on goods also fell by 1.2 per cent, its largest decline since July 2021.
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