Business confidence high in April after earlier slump

Friday 29 April 2016

Article by Kelly Emmerton

After a slow start to 2016, Roy Morgan Research’s Business Confidence rose again in April by 6.4%, to 123.1 points, an increase of 12.5 points since the beginning of the year.

Business confidence high in April after earlier slump

Norman Morris, Industry Communications Director at Roy Morgan Research said business confidence had increased for the third straight month and is currently “the highest [it] has been since January 2014 (131.5).”

Confidence levels are also now above the five year average of 116.8, and were described as, “clearly positive for the economy overall.”

The rise follows a revival of commodity prices in recent months which led to improvement in the Aussie share-market throughout April, prompting increased confidence that businesses would be better off financially this year than they were last.

In fact, 41.1% of businesses reported business being better than a year ago, compared to only 27.5% who believe it to be worse.

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Hopes for the future are also high, with over half (50.6%) of businesses expecting to be financially better off next year. Just 12.5% expected to be worse off, while only 29.3% expected 2017 to be a bad time to invest in business.

Business confidence might also be bolstered by access to affordable business loans, which carry an average interest rate of just 7.4% according to Mozo’s database. Compared with the 9.72% interest rate of five years ago, businesses stand to save over $3,000 in interest on a 5 year loan of $50,000 with today’s low rates.

Business confidence levels differed across states, with levels in Victoria and South Australia remaining largely unchanged, while Tasmania and NSW led the increases. Morris said Queensland and Western Australia were also among the states with increasing business confidence, although he added that, “Western Australia continues to lag the rest of the nation over 6% below the national average.”

Perhaps unsurprisingly, the size of businesses also affected their confidence levels, with large and medium businesses feeling the most confident while small businesses fell behind. All eyes will likely be on next week’s Federal Budget announcement, which presents potential changes to business tax conditions and therefore confidence for next year.

In counterpoint to strong business confidence, consumer confidence has fallen 2.8 points in April to 111.7.

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