Business confidence on the rise while consumer confidence drops

By Mary Ward ·

Business confidence increased by 7% over the month of November, according to figures released today.

Roy Morgan Research’s Business Confidence Survey has revealed that business confidence increased by 8.1 points to 120.3 in November 2014, the highest level since January.

Business confidence has been incredibly volatile throughout 2014, but the current figure is slightly above the four-year average of 118.2.

Roy Morgan Industry Communications Director Norman Morris said the increase was mainly due to attitudes towards investment.

“The improvement in business confidence in November was due largely to a big increase in the feeling that the next 12 months would be a good time to invest in business expansion,” he said.

“Economic growth depends to a large extent on increased business investment and in November the proportion of businesses considering that the next 12 months would be a good time to invest in growing their business increased to 62%, which was the highest level since January and well up on pre-federal election levels of 55% in July 2013 and 56% in August.”

However, Morris encouraged commentators to interpret the figures critically, as the survey was completed before the ABS released statistics showing slower than expected GDP growth, prompting criticism of the government’s economic management.

In contrast, the ANZ-Roy Morgan Australian Consumer Confidence Survey was conducted after the slow growth figures were released, and recorded a 3.1% drop in consumer confidence over the month of November.

It is the lowest consumer confidence figure recorded in four months.

Consumer confidence in the country’s economic outlook over the next year decreased by 7.8% and confidence in the economic outlook over the next five years dropped sharply (-8%).

ANZ Chief Economist Warren Hogan questioned whether the Reserve Bank of Australia’s commitment to a low cash rate was the best choice for maintaining consumer confidence.

“We think a key question for monetary policy right now is would rate cuts help build confidence or generate more concern and uncertainty about the future of the economy,” he said.

“Today’s number suggests that it may be the latter.”

His assessment comes after NAB and Westpac both predicted cash rate cuts in 2015. ANZ expects the RBA to leave the cash rate on hold, although suspects there may be some “easing” in the New Year.