Australian Business Confidence Hits Three-Year Low, Raising Concerns of Economic Slowdown
Market research company Roy Morgan has reported a significant drop in Australian business confidence, reaching its lowest level in three years. The company’s business confidence index dipped by 7.6 points to 87.1 in September, marking the eighth consecutive month below the neutral level of 100. This extended period of negative territory is the longest since October 2020.
Compared to a year ago, business confidence in Australia has experienced a substantial decline of 13.6 points. The decline has been primarily driven by decreases in the three largest states, namely New South Wales (NSW), Victoria, and Queensland. Victoria witnessed the most significant decrease, dropping by 24.9 percent to 81.5, while NSW experienced a decline of 19.6 percent to 87.6. Queensland now has the lowest business confidence level at 76.9, dropping by 3.6 percent compared to a year ago.
Roy Morgan’s CEO, Michele Levine, highlighted that the decrease in business confidence was fueled by concerns regarding the financial situation of businesses. Only 31.3 percent of businesses reported being financially better off than this time last year. Moreover, an all-time record high of 30.5 percent of businesses expressed worry about their own prospects for the next year, expecting to be financially worse off.
One contributing factor to these concerns is the high average retail petrol prices in Australia, which have remained above two Australian dollars per liter for over two months. This sustained high level of petrol prices has raised worries about ongoing inflationary pressures that may necessitate further interest rate increases by the Reserve Bank of Australia before the end of the year.
The persistently low business confidence levels in NSW, Victoria, and Queensland, which collectively account for around 75 percent of the national economy and population, pose significant challenges for the overall growth of the Australian economy. Without an improvement in business confidence in these states, the national economy will continue to struggle in returning to long-term growth averages.
It is crucial for Australian policymakers and business leaders to closely monitor the situation and take appropriate measures to restore confidence and stimulate economic growth. The actions taken in the coming months will be pivotal in determining whether Australia can overcome the current economic challenges and regain a sense of stability and prosperity.
