Business confidence up as COVID-19 restrictions ease

Confidence among Australian businesses has made a comeback, with new Roy Morgan research revealing nearly 51% feel hopeful about their financial prospects next year. 

The latest Roy Morgan Business Confidence report, based on 1,749 detailed interviews, found business confidence last month rose significantly from the record low in April.

In May, business confidence soared to 89.9 points on the Roy Morgan index, up 16.7% (or 13 ppts) since April’s rock bottom.

However, this is still 24.5 ppts below levels from a year ago. 

According to Roy Morgan, business confidence began to recover halfway through April and has continued on that trajectory ever since. 

“For the first time this year, a majority of businesses (50.5%, up 7.4 ppts) say they expect the business will be ‘better off’ financially this time next year,” Roy Morgan’s chief executive, Michele Levine said. 

Businesses also felt more optimistic about switching their gears from survival to investment. About 46% of respondents viewed 2021 as a good time to channel resources into business growth, compared to 43% who thought the opposite. 

This shift in sentiment comes as Australia embraces stage 2 of easing COVID-19 restrictions and businesses begin emerging out of their forced ‘hibernation’. 

The winners and losers of business confidence 

Among all the Aussie states, South Australia saw the biggest jump in confidence in May to 102.5 ppts on the Roy Morgan index - up nearly 50% since April. This is closely followed by Western Australia which recorded 102 ppts on the index.

For context, 100 ppts represents neutral territory, so any number above that is considered positive. 

Levine said South Australia and Western Australia's faster recovery could be due to their success in fighting the pandemic.

“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 have been non-existent for the last few weeks,” she said. 

Meanwhile, Queensland and Tasmania fared the worst, with confidence levels in May at a much lower 80.9 ppts and 75.7 ppts respectively. 

“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. 

As for New South Wales and Victoria - the two states with the most confirmed COVID-19 cases - business confidence was around the national average in May. It sat at 91.5 ppts in NSW and 87.1 ppts in Victoria. 

Levine said while May’s figures are promising, Australia still has a way to go before full recovery. 

“For the Australian economy to really get moving, it is vital for the two largest states NSW and Victoria to improve their business confidence,” she said.

“The two states comprise two-thirds of Australia’s $1.9 trillion economy and both continue to have low business confidence well below the neutral level of 100.” 

Preparing for a reopened economy

As Australia begins to reopen its economy, it’s important for your enterprise to think of ways to transition back into ‘business as usual’. 

For some small businesses, this may mean purchasing new assets, whether that’s a new coffee machine for your cafe or a tractor for your farm. 

The good news is, the government has just announced it will extend the deadline for its instant tax write-off scheme by six months. So if you’re buying assets of under $150,000, you could potentially claim an immediate tax deduction on those purchases made before December 31. 

Or if you’re after an extra bit of finance to cover these new expenses, a business loan could be worth considering. They’re a handy way to get your hands on additional working capital to fund things like stock and staff wages.

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