The post-election bounce is well and truly over, with Roy Morgan reporting that business confidence has crashed, with forward indicators driving the decline:

Roy Morgan Business Confidence dropped 4.6pts (-4.2%) to 106.0 in October, putting it at its lowest level since the Federal Election in mid-May. The fall was heaviest in forward-looking indicators, with the largest decline concerning business prospects this time next year. Even so, a slim majority of businesses (50.4%) say the coming year is a ‘good time to invest in growing the business’.

The October 2019 Business Confidence level is 7.1pts lower than it was year ago and 9.5pts below the long-term average of 115.5. It is now also well below the latest ANZ-Roy Morgan Consumer Confidence, which was at 113.5 on November 2/3, 2019.

Medium-sized businesses lead Business Confidence decline

Medium-sized businesses, with an annual turnover of between $5 and $50 million, have led the broad-based decline. Business Confidence among this group has dropped to just 105.1, down 33.1pts from October 2019 – a decline of 24%.

Micro businesses, Small businesses and Large businesses have also suffered declines, falling between 5.7pts to 9.3pts over the last year, putting them more in line with the overall decline of 7.1pts.

Business Confidence drops below neutral level in Victoria for the first time

The drop was widespread, with five states experiencing a decline. Victorian Business Confidence is below the neutral level of 100 for the first time since this survey began in 2010 while in South Australia it is the lowest of any State, having fallen below the neutral level of 100 for the first time in two years. NSW is the sole exception, with Business Confidence up in October, giving it the highest result of any State…

Movements in underlying Business Confidence indicators in October

● A slim majority of businesses, 50.4% (down 2.1ppts), say the next year will be a ‘good time to invest in growing the business’, while only 35.8% (down 2.8ppts) say it will be a ‘bad time to invest’ (the lowest figure for this indicator for over a year since February 2018);

● An increasing number of businesses, 40.5% (up 6.1ppts), say the business is ‘better off’ financially than this time last year while only a third, 33.4% (down 1.7ppts) say the business is ‘worse off’;

● Just over two-fifths of businesses, 41.8% (down 9.9ppts), expect their business to be ‘better off’ financially this time next year while 20.3% (up 2.1ppts) expect the business to be ‘worse off’;

● A decreasing number of businesses (40.7%, down 5.8ppts) expect the Australian economy to have ‘good times’ economically over the next year while 52.4% (up 4.2ppts) expect ‘bad times’;

● In addition, just 44.1% (down 7ppts) of businesses expect ‘good times’ for the Australian economy over the next five years and 45.9% (up 2.9ppts) now expect ‘bad times’.

Roy Morgan Business Confidence results in October are based on 1,104 interviews with a cross-section of Australian businesses. Business Confidence is now just below the 8yr average (115.5).