Business confidence up despite stubborn cash rate

As of December, business confidence was sitting at 105.9, down 1 point from the month prior. This marks the third consecutive month of a score above 100 points, a positive sign for Australia’s businesses.

In fact, optimism is strong, with 40.5 per cent expecting good times over the next 12 months. Meanwhile, 21.1 per cent are expecting bad times,” according to the Roy Morgan survey.

Brokers may also be keeping busy over the next year as 42.8 per cent of respondents recognised the next 12 months as a “good time to invest.” This dropped to 37.7 per cent who believed it was a “bad time to invest.”

“Roy Morgan business confidence was virtually unchanged at 105.9 in December with four indices now in positive territory for the first time in two years since January 2023,” said Roy Morgan CEO Michele Levine.

“The biggest drivers putting business confidence into positive territory are the two indices relating to prospects for the next 12 months. This includes a plurality of businesses, 40.5 per cent, saying they expect to be ‘better off’ financially this time next year and a large majority of 59.7 per cent of businesses saying they expect ‘good times’ for the Australian economy over the next 12 months.”

While business confidence is still below the long-erm average of 111.2 points, it’s still well above December 2023, where it stood at 91.1 points. It’s also far higher than consumer confidence, which currently stands at 85.8 points.

This boost in business confidence over the year may come as a surprise considering the Reserve Bank of Australia (RBA) hasn’t cut interest rates since November 2023. Perhaps anticipated cuts are keeping people optimistic.

“Although the Reserve Bank decided not to cut interest rates during 2024, the signs are there that interest rates will be cut this year. The latest ABS monthly inflation estimate for November 2024 shows annual inflation at only 2.3 per cent,” said Levine.

“The reduction in the official ABS inflation estimates during 2024 is building expectations among many, including businesses, that the Reserve Bank will soon be embarking on a new cycle of interest rate cuts this year– and these hopes have helped to support and increase business confidence in recent months.”

Over the last couple of months, there were 12 industries that recorded positive business confidence, with scores over 100:

1. Education and training (129 points)
2. Mining (124.9 points)
3. Financial and insurance services (124.9 points)
4. Arts and recreational services (116.4 points)
5. Construction (115 points)
6. Healthcare and social assistance (113.1 points)
7. Retail trade (111.7 points)
8. Information media and telecommunications (110.6 points)
9. Rental hiring and real estate services (110.1 points)
10. Administrative and support services (107.9 points)
11. Accommodation and food services (105.8 points)
12. Professional, scientific, and technical services (101.4 points)

“On a State-by-State basis business confidence is in positive territory in five States including Victoria (108.2), South Australia (108.0), Queensland (105.9), New South Wales (104.1) and Tasmania (103.2). However, business confidence is lagging and in negative territory below 100 in Western Australia at only 99.5. West Australians are set to face a State Election in a few weeks on Saturday March 8 between WA Premier Roger Cook (Labor) and the Liberal-National opposition,” Levine said.

“At an industry level, it is education and training which is the most confident industry on 129.0. Education and training has now been among the top five most confident industries for two-and-a-half years since June 2022.

“At the other end of the scale is electricity, gas, water and waste services on only 60.1 below wholesale trade on 84.4 which has now averaged below the neutral level of 100 for over three years since late 2021. In third last place is transport, postal and warehousing on only 89.2. The transport, postal and warehousing industry has been among the least confident industries this year and is the only industry for which confidence has averaged under 80 throughout the entire year of 2024.”

[Related: SMEs suffering as consumer spending dips]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

To reach Jack, email him at: This email address is being protected from spambots. You need JavaScript enabled to view it.