Nearly half of businesses bracing for “bad times”, research reveals

Business confidence remained relatively steady in June, Roy Morgan research reveals, but nearly half of businesses believe Australia will face “bad times” economically over the next 12 months.

The latest Roy Morgan Research Business Confidence Survey involved interviews with 2,577 businesses across Australia in June.

The survey shows business confidence in June remained relatively steady at 105.4 points, down only marginally from 105.8 points.

According to Norman Morris, industry communications director at Roy Morgan Research, there is a feeling that economic conditions in Australia over the next 12 months will remain poor.

Nearly half (47%) of the businesses surveyed believe Australia will face “bad times” economically over the next 12 months. This is the highest level since September 2011.

“As a consequence of the feeling that the economy will still be facing tough times over the next 12 months, businesses are feeling less inclined to invest in expansion,” Morris says.

“It is a bad sign for economic recovery in Australia that 51% of businesses think that the next 12 months will be a bad time to invest more in the business.”

“This is around the highest negative sentiment seen over the last 18 months.”

It looks like global economic uncertainty, the carbon tax, low commodity prices and the mining tax are combining to create “considerable doubt” among businesses, Morris says.

However, Morris says there are some tentative signs of improvement.

According to the survey, the most positive industries are education and training; information, media and telecommunications; and finance and insurance.

In January, mining was the most confident but it has slipped back to sixth place. Meanwhile, the least confident industries are construction, and transport, postal and warehousing.

With regard to business size, business confidence among micro businesses fell from 108 points in May to 107 in June, while confidence among small businesses fell from 114.9 points to 111.9.

Micro businesses are defined as having annual turnover less than $1 million, while small businesses have an annual turnover of $1-5 million.

Medium to large businesses also saw confidence fall, from 122.7 points in May to 121.4 points in June.

Morris says the interest rate cuts in May and June look like they have failed to boost business confidence, although he concedes they may have stopped it falling further.

“The ultimate impact of reductions in interest rates on business will depend on how much of the reduction in official rates is passed on to business,” Morris says.

“[It will also depend on] how businesses react to the world economic situation, the carbon tax and other changes, which, combined, have the potential to maintain a mood of uncertainty.”