Business confidence has plunged significantly in March, Roy Morgan has shared in a recent update. All states except one have reported a decrease in confidence, but businesses remain positive about future prospects.
Driven by the large increase in petrol prices and the ongoing conflict in Ukraine, business confidence has shed 13.8 points. Similar to consumers, the tensions across the globe, ongoing natural disasters and increased prices are majorly influencing confidence.
The current business confidence level is 106.7, 12.9 percent below February levels. But this figure is above the 2021 level of 93.4. However, the average remains below the long term average of 113.7. Interestingly, this is the opposite of consumer confidence, which is currently 94, and recently dropped to the lowest levels since September 2020 with three weeks of consecutive falls.
Despite this drop in confidence among businesses, the majority of businesses are confident that ‘good times’ are coming over the next year. The majority (50.5 percent) are expecting good times for the Australian economy this year, with 46.7 percent saying that now is a good time to invest in growing business.
These drops are not COVID related, explained Michele Levine, the CEO of Roy Morgan, but are instead a result of the Ukrainian conflict and spike in energy costs and petrol prices. “Roy Morgan Business Confidence fell heavily in March, down 13.8pts (-12.9 percent) to 106.7, the sixth straight month of ‘zig-zagging’ up and down since being at 104.6 in September 2021,” she said. “A number of influences have impacted on Business Confidence during the last six months including the re-opening of NSW, Victoria and the ACT in October, followed by a highly disruptive wave of the ‘Omicron variant’ during the Summer months as well as extensive flooding in NSW and Queensland in March.”
All states and territories dropped in confidence in March, except for Victoria. Western Australia led the falls, dropping to 101.8 points – a plunge of 30.9 percent compared to 2021 (147.3). Two states slipped below the neutral level of 100 – Queensland and Tasmania, now at 98.7 and 85.1, respectively. These two states dropped 14.6 percent and 26.3 percent. In contrast, Victoria increased 0.9 percent, now at 108.8. Looking back at 2021, the state was plagued by its third lockdown, resulting in state-wide anxiety for businesses and consumers alike.
“At a State-based level Business Confidence is highest in the re-opened, and largest, economies of NSW (113.5) and Victoria (108.8) as well as in South Australia (108.8) which elected a new ALP Government led by Peter Malinauskas in March. The victory for Malinauskas was the first by any Opposition Leader in Australasia since the COVID-19 pandemic began after six straight victories to incumbents in the ACT, NT, Queensland, Tasmania, Western Australia and New Zealand,” Levine said. “The impact of higher inflation will be felt by all Australians over the rest of this year and is set to lead to interest rate increases later this year – perhaps as early as June, straight after next month’s Federal Election. The handling of an inflationary environment most Australians have never experienced is set to provide the first big test for whichever party is elected in May.”
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