Roy Morgan Business Confidence drops by 6.4 points to 90.2 in November – lowest since September 2020

In November 2022 Roy Morgan Business Confidence was 90.2 (down 6.4pts since October), as declining confidence about the performance of the Australian economy drove the index to its lowest level since September 2020 during the middle of Victoria’s second wave of COVID-19.

The second straight monthly fall in the index follows the RBA’s decision to raise interest rates for a seventh straight month in early November, up by 0.25% to 2.85% - the highest official interest rates for over nine years since May 2013. This is the RBA’s fastest set of increases to interest rates for nearly thirty years since the RBA raised rates by 2.75% in only five months in 1994.

Treasurer Jim Chalmer’s first Federal Budget, delivered in the final week of October, was widely considered to be a fairly responsible budget with no big spending promises. The results of today’s Business Confidence survey for November showed the Federal Budget failed to boost confidence in the business community by any significant amount.

The biggest driver of the drop in Business Confidence related to the performance of the Australian economy over the next year with only 34.1% (down 8.1ppts) of businesses expecting ‘good times’, while nearly two-thirds of businesses, 63.6% (up 6.5ppts), say there will be ‘bad times’ for the economy.

However, businesses are still positive about their own prospects, with 44.7% (up 3.2ppts) of businesses expecting to be ‘better off’ financially this time next year compared to 26.9% expecting to be ‘worse off’

Business Confidence is now 22.7pts below the long-term average of 112.9 but is still higher than the latest - ANZ-Roy Morgan Consumer Confidence of 83.1 for November 21-27, 2022.

Roy Morgan Monthly Business Confidence -- Australia

Source: Roy Morgan Business Single Source, Dec 2010-Nov 2022. Average monthly sample over the last 12 months = 1,440.

Business Confidence is highest in NSW, but only at the neutral level of 100

Year-on-year Business Confidence in November is down by a large 22.8pts (-20.2%) to 90.2 and is now 18.9pts lower than two years ago in November 2020 (109.1) during the middle of the COVID-19 pandemic. Business Confidence is now at its lowest since September 2020 (85.6).

The index is down in all States from a year ago and only New South Wales at 100.0, down 16.6pts (-14.3%) is not below the neutral level of 100.

Just below the neutral level of 100 is South Australia on 99.3, down 17.9pts (-15.3%) on a year ago, and Tasmania on 92.2, down 13.9pts (-13.1%) on a year ago.

The largest fall in Business Confidence is in Western Australia with the index down a massive 48.1pts (-34.4%) to 91.5. One year ago, Western Australia was the only State to announce it would not be opening up its borders to Victoria and New South Wales in the run-up to Christmas while other States including Queensland, South Australia and Tasmania all relaxed their border restrictions.

Business Confidence is just below the national average in Victoria at only 88.8, down 19.2pts (-17.8%) on a year ago. At the end of November Victorians re-elected the ALP Government led by Premier Daniel Andrews with an almost unchanged majority.

The State of Queensland continues to lag the rest of the nation with Business Confidence of only 70.5 in November, down 28.4pts (-28.7%) on a year ago. The index has averaged 82.0 over the last six months since the Federal Election and hasn’t been above 90 since June 2022 (94.1).

Business Confidence by State in November 2021 vs November 2022

Source: Roy Morgan Business Single Source, November 2021, n=1,368, November 2022, n=1,374. Base: Australian businesses. *Tasmanian Business Confidence is measured over two months: Oct-Nov 2021 cf. Oct-Nov 2022.

Education & Training is the only industry to increase Business Confidence from a year ago

Over the last two months only four industries, Education & Training, Property & Business Services, Information Media & Telecommunications and Administration and Support Services had Business Confidence over 15% higher than the national average of 93.4.

The most confident industry was Education & Training with Business Confidence of 111.7, an increase of 3.9pts (+3.6%) on a year ago. This was the only industry to record an increase in Business Confidence compared to a year ago as Australia’s borders re-opened allowing international students to return to Australia to study after two years locked out due to the COVID-19 pandemic.

The Property & Business Services industry remains confident with Business Confidence of 110.4, although this is down 10.4pts (-8.6%) on a year ago just ahead of Information Media & Telecommunications on 109.1, down 8.4pts (-7.1%) and Administration & Support Services on 107.9, down 9.5pts (-8.1%) on a year ago.

After a strong period for travellers over the winter months Accommodation & Food Services has a high Business Confidence of 107.7, although this is down 19.3pts (-15.2%) on a year ago as rising inflation and interest rates start to impact.

Just outside the top five is the Mining sector on 106.6, down 8.2pts (-7.2%). The Mining industry has had high Business Confidence this year based on record prices for several key commodities led by coal, gas and iron ore which have led to record high trade surpluses during much of 2022.

These are the only six industries with Business Confidence higher than the neutral level of 100 in October-November 2022.

Finance & Insurance has the lowest Business Confidence in October-November 2022 at only 55.1, over 40% below the national average of 93.4, and down a large 61.9pts (-52%) on a year ago. Almost as low is Electricity, gas & water on only 59.2, down 27.5pts (-31.8%) on the same time in 2021.

Other industries with far lower than average Business Confidence include Construction on 81.4, down 15.9pts (-16.4%) on a year ago, Wholesale on 78.5, down a large 46.7pts (-37.3%) on a year ago and Retail on only 75.6, down 16.9pts (-18.3%) on a year ago.

Business Confidence for Top 5 and Bottom 5 Industries in October – November 2022

Source: Roy Morgan Business Single Source, October-November 2022, n=3,067. Base: Australian businesses. Note: In the chart above green bars represent Business Confidence in positive territory above the national average and red bars represent Business Confidence well below the national average and below the neutral level of 100.

Businesses are positive about their own prospects over the next year but are pessimistic at record low levels about the performance of the Australian economy over the next five years

• In November slightly more than a third of businesses, 37.5% (down 2.4ppts), said the business is ‘better off’ financially than this time a year ago while slightly more, 40.1% (up 8.2ppts), said the business is ‘worse off’ (the highest figure for this indicator for over a year since September 2021);

• However, businesses are still broadly positive about their own prospects for the next year, with 44.7% (up 3.2ppts) of businesses, expecting the business will be ‘better off’ financially this time next year, while just over a quarter, 26.9% (up 0.7ppts) expect the business will be ‘worse off’;

• Of concern is that an increasing majority of businesses, 63.6% (up 6.5ppts) expect ‘bad times’ for Australia’s economic performance over the next year (the highest figure for this indicator for over two years since September 2020) while only around a third, 34.1% (down 8.1ppts), expect ‘good times’ (the lowest figure for this indicator for over two years since September 2020);

• Businesses are also more negative on the longer-term outlook for the Australian economy with an increasing majority of 60.2% (up 0.9ppts) of businesses expecting ‘bad times’ for the Australian economy over the next five years (a new record high for this indicator) while only 33.5% (down 3.2ppts) expect ‘good times’ over the next five years (a new record low for this indicator);

• Businesses are split on whether to invest in growing their business with 43.1% (down 0.6ppts) saying the next 12 months will be a ‘good time to invest in growing the business’, (the lowest figure for this indicator for over two years since August 2020) while a slim majority of 51.2% (up 4.3ppts) said it will be a ‘bad time to invest’ in growing the business (the lowest figure for this indicator for over a decade since May 2012).

Michele Levine, CEO of Roy Morgan, says Business Confidence fell in November after the Albanese Government’s first Federal Budget delivered by Treasurer Jim Chalmers in late October failed to provide a boost to businesses dealing with rising inflation and interest rates:

The latest Roy Morgan Business Confidence results for November are based on 1,374 detailed interviews with a cross-section of Australian businesses from each State and Territory. Detailed findings are available to purchase on a monthly or annual subscription as part of the Roy Morgan Business Confidence Report.

To learn more about Roy Morgan’s Business Confidence, Consumer Confidence and Inflation Expectations data call (+61) (3) 9224 5309 or email askroymorgan@roymorgan.com.