Business confidence falls further

Roy Morgan Research’s Business Confidence index showed business confidence decreased by 3.5 per cent to 114.5 points in December, following November’s decline of 0.5 per cent.

The two-month drop puts the level of business confidence below the five-year average of 116.9 index points.

According to Roy Morgan Research, the combined decline of 4 per cent (4.8 points) over the last two months is an indication that the initial burst of confidence from when Malcolm Turnbull became prime minister is beginning to “cool off”.

However Roy Morgan Research industry communications director Norman Morris said this drop is “moderate considering the number of negative issues recently”.

“In December the ASX showed considerable volatility, being down 5.0 per cent mid-month, before rebounding to be up by 2.5 per cent for the month,” Mr Morris said.

“This type of fluctuation, combined with global economic uncertainty (particularly China), the deteriorating Australian budgetary position (highlighted in the government’s mid-year economic update), declining commodity prices and continued speculation on tax reform, all make for a very uncertain business outlook.”

The research revealed business confidence in December was highest in Tasmania, followed by New South Wales, Queensland, Victoria and Western Australia.

Meanwhile, the industries that saw a drop in business confidence in December were manufacturing, finance and insurance, professional services, mining and wholesale.

Conversely, business confidence increased in the agriculture, construction and accommodation/food services sectors, according to the research.

“Business confidence is the key driver of economic growth, so it will be essential for the federal government to take action to convince business they have a plan that will provide the positive environment for growth,” Mr Morris said.

“International events will also be likely to continue to impact on business and consumer confidence but obviously, the government has little control over this.”

[Related: 'Stretched' property market to turn negative, says economist]