Roy Morgan Business Confidence down 2.2 points to 93.6 in March before the RBA paused interest rate hikes

In March 2023 Roy Morgan Business Confidence was 93.6 (down 2.2pts since February) after the RBA raised interest rates for a record tenth consecutive meeting in March, up +0.25% to 3.6%.

However, since then the RBA has paused its interest rate hiking cycle leaving official interest rates unchanged in April. The RBA’s decision to pause the cycle of interest rate increases came after the ABS monthly inflation indicator fell to 6.8% for February 2023, down from a high of 8.4% in December 2022.

The fall in Business Confidence in March was the second consecutive fall after a new year’s boost in January although the index remains below the recent low of 90.2 reached in November 2022. The decline in March was mainly driven by rising pessimism about the long-term prospects for the economy.

Now only 33.4% of businesses (down 7.7ppts) expect ‘good times’ for the Australian economy over the next five years while more than three-fifths, 60.6% (up 6.3ppts), expect ‘bad times’ – this is a record low net rating of -27.2 for this indicator.

Businesses were slightly more confident about their own prospects in March with 41.8% (up 0.6ppts) expecting the business will be ‘better off’ financially this time next year compared to 27.1% (down 1ppt) who say the business will be ‘worse off’.

Business Confidence is now 18.9pts below the long-term average of 112.5 but still 15.4pts higher than the latest - ANZ-Roy Morgan Consumer Confidence of 79.3 for April 3-9, 2023.

Roy Morgan Monthly Business Confidence -- Australia

Source: Roy Morgan Business Single Source, Dec 2010-Mar 2023. Average monthly sample over the last 12 months = 1,435.

Business Confidence is highest in Tasmania early in 2023, but down in every other State

Business Confidence was down slightly in March, following the RBA’s tenth straight interest rate increase, in all States except Tasmania. Business Confidence is now at 93.6, down 2.2pts (-2.4%) from a month ago and down a large 13.1pts (12.3%) from a year ago.

The notable exception is Tasmania – now the only State with a Liberal-led Government. Business Confidence increased in Tasmania by 22.6pts (+24.9%) from a year ago to 113.2 – over 20% higher than the national average of 93.6.

Business Confidence is above the national average in South Australia at 98.8, but down 10pts (-9.1%) from a year ago, and in New South Wales at 97.6, but down 15.9pts (-14%) from a year ago. The recent New South Wales election at the end of March saw the last Liberal-led Government on the Australian mainland voted out of office – the final Roy Morgan Poll of the New South Wales electorate was the most accurate poll predicting the two-party preferred result: ALP 53.9% cf. L-NP 46.1%.

In the three other States Business Confidence is down on a year ago and now below the national average. In Western Australia Business Confidence is down 9pts (-8.8%) from a year ago to 92.8 and in Victoria the measure is down a large 16.8pts (-15.5%) from a year ago to 92.0.

Business Confidence is once again the lowest in the country in Queensland at only 83.3, down 15.4pts (-15.5%) from a year ago. Business Confidence in Queensland has now averaged well below 90 since last year’s Federal Election in May 2022 – the only state to average below 90 since the election.

Business Confidence by State in March 2022 vs March 2023

Source: Roy Morgan Business Single Source, March 2022, n=1,383, March 2023, n=1,431. Base: Australian businesses. *Tasmanian Business Confidence is measured over two months: Jan-Mar 2022 cf. Jan-Mar 2023.

Accommodation & Food Services, Education & Training, Administration & Support Services, Public Administration & Defence and Wholesale are the most confident industries in March

Over the last two months only four industries, Accommodation & Food Services, Education & Training, Administration & Support Services and Public Administration & Defence had Business Confidence over 15% higher than the national average of 94.7.

The most confident industry was again Accommodation & Food Services with Business Confidence of 127.1, an increase of 3.8pts (+3.1%) on a year ago. The end of pandemic related travel restrictions in late 2022 is still providing a boost to this industry as Australians enjoy the freedom to travel once more.

Another industry with high Business Confidence is Education & Training on 125.2, an increase of 12.5pts (+11.1%) on a year ago. This industry has been amongst the most confident throughout the last year as the relaxation of pandemic restrictions led to a re-opening of Australia’s borders and the return of tens of thousands of international students to Australia.

In third place is Administration & Support Services on 116.7 just ahead of Public Administration & Defence on 112.2 – although Business Confidence in both industries is down slightly on a year ago.

Despite a large fall of 16.6pts (-13.2%) on a year ago Business Confidence for the Wholesale industry remains relatively high at 108.7 – the fifth highest of any industry.

Other confident industries include Mining with Business Confidence of 107.3, up 20.1pts (+23.0%) on a year ago just ahead of Recreation & Personal on 107.0, up 28.2pts (+35.8%) on a year ago and Community Services on 105.7, down 17.2pts (-14%) on a year ago.

There’s a familiar industry at the bottom with Business Confidence lowest of all for Electricity, gas & water on only 72.0 during February and March 2023 just below the Construction industry on 74.5 – these are the only two industries with Business Confidence over 20% below the national average of 94.7.

Finance & Insurance has Business Confidence of only 80.8 following a large drop of 47.9pts (-37.2%) on a year ago – the largest drop of any industry measured.

Other industries with low Business Confidence include Property & Business Services on 87.1 after a fall of 42.5pts (-32.8%) on a year ago and Agriculture on 89.6, down 27.3pts (-23.4%) on a year ago.

Business Confidence for Top 5 and Bottom 5 Industries in February – March 2023

Source: Roy Morgan Business Single Source, February – March 2023, n=2,886. 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.

Business Confidence was mixed in March with businesses less confident about the economy’s long-term prospects but still broadly positive about their own prospects:

• In March businesses were slightly more negative about Australia’s economic performance over the next year with a majority of 60.3% (up 1ppt) expecting ‘bad times’ while only 39.1% (down 10.2ppts), expect ‘good times’;
• Businesses were even more negative on the longer-term outlook for the Australian economy with a rising majority of 60.6% (up 6.3ppts) expecting ‘bad times’ for the Australian economy over the next five years while only 33.4% (down 7.7ppts) expect ‘good times’ over the next five years – the largest net negative rating (-27.2) on this question in the history of the survey;
• Businesses are still broadly positive about their own prospects for the next year, with 41.8% (up 0.6ppts) expecting the business will be ‘better off’ financially this time next year, while just over a quarter, 27.1% (down 1ppt), expect the business will be ‘worse off’;
• Just under two-fifths of businesses, 35.0% (down 2ppts), said their business is ‘better off’ financially than this time a year ago while just over a third, 33.9% (down 3.9ppts), said the business is now ‘worse off’;
• Views on whether now is a ‘good or bad time to invest in growing the business’ are barely changed from a month ago with 46.1% (down 0.4ppts) saying the next 12 months will be a ‘good time to invest in growing the business’, while almost as many, 45.2% (down 1ppt) said it will be a ‘bad time to invest’ in growing the business.

Michele Levine, CEO of Roy Morgan, says Business Confidence dropped for a second straight month in March, down by 2.2pts to 93.6, after the RBA raised official interest rates for a record tenth straight month to a decade high of 3.6% early in the month:

“Roy Morgan Business Confidence dropped 2.2pts (-2.3%) to 93.6 in March, sending the index to its lowest for four months since November 2022 (90.2). Business Confidence is now 13.1pts (12.3%) lower than it was a year ago in March 2023 (106.7) – before the RBA began to raise interest rates.

“The good news for businesses is that the RBA’s record tenth rate hike in March may be the central bank’s last – the RBA left interest rates unchanged in April for the first time in exactly a year.

“A look at the key indicators shows that businesses remain broadly confident about their personal circumstances with 41.8% (up 0.6ppts) expecting the business will be ‘better off’ financially this time next year compared to 27.1% (down 1ppt) who say they will be ‘worse off’ financially.

“The real concern businesses have is about the fortunes for the Australian economy over the next year and next five years. Over three-fifths of businesses expect ‘bad times’ for the Australian economy over the next year, 60.3% (up 1ppt), and even more, 60.6% (up 6.3ppts) expect ‘bad times’ for the economy over the next five years.

“The uncertainty businesses feel about the economic situation facing Australia highlights the importance of the Albanese Government’s first Federal Budget in under a month in early May. Treasurer Jim Chalmers will set out the Government’s vision for where the Australian economy will go over the next few years and clearly needs to reassure the business community he has a plan to deal with the challenges of high inflation and rising interest rates.

“On a State-by-State basis Business Confidence is above the neutral level of 100 in only one State – Tasmania – at 113.2. Incidentally, this is the only State with a Liberal-led Government after the defeat of the Coalition Government in New South Wales in late March.

“Business Confidence is below the neutral level of 100 in all other States led by South Australia (98.8), New South Wales (97.6), Western Australia (92.8), Victoria (92.0) and lowest of all in Queensland on only 83.3. Since last year’s Federal Election Business Confidence in the ‘Sunshine State’ has averaged well below 90 – clearly lower than any other State.

“At an industry level there were four industries flying high in February-March 2023 with Business Confidence above 110 – all over 15% higher than the national average. Leading the pack are Accommodation & Food Services on 127.1, Education & Training on 125.2, Administration & Support Services on 116.7 and Public Administration & Defence on 112.2.

“Other industries with high Business Confidence clearly in positive territory include Wholesale on 108.7, Mining on 107.3, Recreation & Personal on 107.0., Community Services on 105.7 and Information Media & Telecommunications on 102.2.

“In contrast there are two industries for which Business Confidence is again lagging more than 20% below the national average including Construction, down 23.9pts (-24.3%) on a year ago to only 74.5, and Electricity, gas & water on just 72.0 and now lower than any other industry.”

The latest Roy Morgan Business Confidence results for March are based on 1,435 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.

For comments or more information please contact:

Michele Levine

CEO, Roy Morgan

Office: +61 (3) 9224 5215

Mobile: 0411 129 093

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.

About Roy Morgan

Roy Morgan is Australia’s largest independent Australian research company, with offices in each state, as well as in the U.S. and U.K. A full-service research organisation, Roy Morgan has over 80 years’ experience collecting objective, independent information on consumers.