Roy Morgan Research’s Business Confidence increased by 6.5 points in October (up 5.8%) to 119.3, the highest level since November 2014. This improvement in confidence was generally expected initially as a result of Malcolm Turnbull becoming Prime Minister, but it has strengthened further in October to be 16.3% higher than in August prior to the leadership change.
In October, Roy Morgan Business Confidence was above the five-year average (116.9) and higher than what it was 12 months ago (114.9 in October 2014). These October 2015 figures are the result of 1,048 interviews with a cross-section of businesses across Australia.
The increase in Business Confidence in October is very positive for the economy, particularly as it builds on the boost immediately following the appointment of the new PM in September. The ANZ-Roy Morgan Consumer Confidence rose 8.7% (to 114.5) immediately in the week after the change of PM, but in the six weeks since that survey, it has only increased by a further 0.6% (to 115.2). This indicates that it is often difficult to maintain the initial improvement after a major leadership change.
Norman Morris, Industry Communications Director, Roy Morgan Research says:
“It is a potentially good sign for the economy that Roy Morgan Business Confidence has continued to improve in October, given the positive impact the change of PM already had in September. Contributing to this improvement was the fact that there was a lack of major bad economic news during the month — in fact the ASX increased by 4.3%.
“There were, however, some headwinds emerging during the month, with issues relating to housing prices possibly peaking, higher mortgage rates, continued volatility in global financial markets, high household debt and widespread publicity and uncertainty regarding tax reforms.
“There are some tentative signs that increased confidence in some sectors will help make up for the decline in mining. In October there was an increase in confidence in retail, finance and insurance, rental/hiring/ real estate, education/training, wholesale trade and information/media/telecommunications. The all-important construction sector showed some decline as did manufacturing.
“Roy Morgan Business Confidence varies by state, with Victoria ahead followed by New South Wales, Queensland, South Australia, Western Australia and Tasmania.
“Over the last month, confidence among businesses of all sizes has improved, as has the feeling that the next 12 months will be a good time to invest in business growth. A positive outlook by business towards investing is the key stimulus to the economic growth the Government is looking for.
“In the three weeks before Malcolm Turnbull was elected by the party-room as PM, Roy Morgan Business Confidence was 104.2. Over the following three weeks it averaged 115.5, and it has now risen to 119.3. The challenge for the Federal Government is to continue to boost business confidence by delivering a clear and credible plan for the economy and showing that it is acting to implement the plan.”