Business optimism down after February RBA rate cut

Despite Australian businesses entering 2015 with a more optimistic outlook than previous years, Roy Morgan Research’s latest Business Confidence survey showed a significant dip in business confidence over February, down 8% from January.

While the Reserve Bank of Australia cut the official cash rate by 25 basis points in February to 2.25%, according to Roy Morgan Communications Director Norman Morris there was uncertainty about the budget deficit, leadership speculation, employment figures and global economic issues.

“The RBA rate decision not only failed to counter all these negative factors but possibly sends a message that they are concerned about the economic outlook for Australia,” Morris explained.

The low level of business confidence over February, resulted in less Australian businesses looking at business growth through investment over the next 12 months.

“Casting a shadow over the country’s economic growth prospects is the fact that businesses are now less confident about investing in expansion. The proportion of those who believe that ‘the next twelve months would be a good time to invest in growing their business’ is now down to its lowest level since September 2012.”

While banks have been seeking to boost their drive into the business market, Morris said that less confident business borrowers would likely result in cautious lenders.

“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.”

Morris said that whether or not banks pass on the RBA rate cuts will also impact on business satisfaction levels. Thankfully, Mozo’s business banking database shows that a large majority of business bank lenders, passed on the full February rate cut to their business customers.