Business confidence plummets

NAB’s business confidence index has plunged to its lowest level since the tech wreck of 2000-01, with concerns about global financial turmoil, higher interest rates and a potential economic slowdown weighing heavily on businesses.

The index slumped 10 points for the June quarter to -4 points, compared with a peak of +14 points in May 2007.

About 20% of Australian businesses expect a minor improvement in conditions in the three months to 30 June, but more than 25% expect business conditions to deteriorate slightly.

Small, medium and emerging companies are marginally more confident than their big business counterparts. SMEs have a confidence of reading of -2.5 points, compared with -4 points for big business.

But SMEs are particularly pessimistic in the manufacturing sector (a confidence reading of -8 points), property services sector (-8 points), the accommodation, café and restaurant industry (just over -6 points) and the retail sector (just under -4 points).

In more positive news, businesses in the wholesale, transport and storage, business services and health sectors posted positive confidence readings.

The head of Australian economics at NAB, Jeff Oughton, says companies have experienced significant shocks in the past few months. “You’ve had this unexpected global financial shock and at the same time the RBA has had to continue to raise rates. Those are marked and unexpected changes.”

But Oughton is quick to point out that Australian business conditions remain good and confidence levels remain well above the levels seen during the recessionary periods of the 1990s.

He says businesses should not be too pessimistic about the future. “We think growth will be sustained here – we are not headed for recession.”

 

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