Roy Morgan Business Confidence drops by 4.1 points to 96.6 in October
In October 2022 Roy Morgan Business Confidence was 96.6 (down 4.1pts since September), as confidence about the economy’s performance over the next year, and next five years, declined.
The fall in the index follows the RBA’s decision to raise interest rates for a sixth straight month in early October, up by 0.25% to 2.6% - the highest official interest rates for over nine years since August 2013. This is the RBA’s fastest set of increases to interest rates for nearly thirty years since the RBA raised rates by 2.75% in only five months in 1994.
Treasurer Jim Chalmer’s first Federal Budget, delivered in the final week of October, has had only a marginal result on the movement of Business Confidence in October but any impact it does have will be reflected in the results for November due in a month’s time.
The biggest drivers of the drop in Business Confidence related to the performance of the economy and now 42.2% (down 1.4ppts) of businesses expect ‘good times’ for the economy over the next year and 36.7% (down 5.4ppts) say there will be ‘good times’ for the economy over the next five years.
However, businesses are still positive about their own prospects, with 41.5% of businesses expecting to be ‘better off’ financially this time next year compared to 26.2% of businesses expecting to be ‘worse off’
Business Confidence is now 16.4pts below the long-term average of 113.0 but remains significantly higher than the latest - ANZ-Roy Morgan Consumer Confidence of 79.9 for October 24-30, 2022.
Roy Morgan Monthly Business Confidence -- Australia
Source: Roy Morgan Business Single Source, Dec 2010-Oct 2022. Average monthly sample over the last 12 months = 1,440.
Business Confidence is down in all States, but still positive in NSW, WA and Tasmania
Business Confidence in October is down by 18.7pts (-16.2%) from a year ago to 96.6 and is now 2.2pts lower than two years ago in October 2020 (98.7) during Victoria’s second wave of COVID-19.
The index is down in all States from a year ago although three States are now in positive territory with Business Confidence above the neutral level of 100 and three States are in negative territory below 100.
Business Confidence is now highest in Western Australia, but still down 18.8pts (-14.4%) to 112.0 and second highest in New South Wales at 103.0, but down 9.9pts (-8.8%) from a year ago.
Business Confidence is also marginally positive in Tasmania at 100.5 in September-October 2022, down by 12.3pts (-10.9%) from a year ago.
Business Confidence is down from a year ago and under the neutral level of 100 in the other three States. Clearly the largest fall was in South Australia, down 46.8pts (-33.6%) to 92.7. There were also falls in Victoria, down 16.5pts (-15.6%) to 89.3, and Queensland, down 29.9pts (-26.0%) to 85.3 and which has now been in negative territory for five months in a row since the Federal Election.
Business Confidence by State in October 2021 vs October 2022
Source: Roy Morgan Business Single Source, October 2021, n=1,661, October 2022, n=1,693. Base: Australian businesses. *Tasmanian Business Confidence is measured over two months: Sep-Oct 2021 cf. Sep-Oct 2022.
Mining, Education & Training, Accommodation & Food Services and Information, Media & Telecommunications are the most confident industries in the last two months
The Mining and Education & Training industries were easily the most confident in September-October 2022 with Business Confidence over 20% higher than the national average in both.
The Mining industry had the highest Business Confidence at 120.9, up a large 44.2pts (+57.6%) from a year ago based on record prices for several key commodities led by coal, gas and iron ore which have led to record high trade surpluses over the last few months.
Just behind in second place was Education & Training on 119.6, after an impressive increase of 22.3pts (+22.9%) on a year ago after international borders fully re-opened and the flow of international students into Australia resumed earlier this year.
Accommodation & Food Services and Information Media & Telecommunications were clearly the next most confident industries with Business Confidence over 10% higher than the national average.
After a strong period for travellers over the winter months Accommodation & Food Services had Business Confidence of 113.3, although this was down 6.4pts (-5.3%) on a year ago as rising inflation and interest rates start to impact. Business Confidence for the Information Media & Telecommunications industry was also strong at 112.4, up 13.9pts (+14.1%) – the third biggest increase of any industry.
These four industries are among only eight with Business Confidence higher than the neutral level of 100 in September-October 2022.
Other industries with Business Confidence in positive territory include Administrative & Support Services on 108.2, down 12.9pts (-10.7%) on a year ago, Property & Business Services on 107.9, down 9.6pts (-8.2%) on a year ago, Professional, Scientific & Technical Services on 106.5, up 3.7pts (+3.6%) on a year ago and Agriculture on 101.0, down 31.1pts (-23.5%) on a year ago.
Finance & Insurance has easily the lowest Business Confidence in September-October 2022 at only 66.1, over 30% below the national average of 98.6, and down a large 43.8pts (-39.8%) on a year ago.
Other industries with far lower than average Business Confidence include Public Administration & Defence on 79.0, down 40.4pts (-33.8%) on a year ago, Construction on 87.3, down 6.8pts (-7.2%) on a year ago, Electricity, gas & water, also on 87.3, down 9.9pts (+10.2%) on a year ago and Retail on 92.8, down 7.9pts (-7.8%) on a year ago.
Business Confidence for Top 5 and Bottom 5 Industries in September – October 2022
Source: Roy Morgan Business Single Source, September-October 2022, n=3,052. Base: Australian businesses. Note: In the chart above green bars represent Business Confidence in positive territory above the national average and red bars represent Business Confidence well below the national average and below the neutral level of 100.
Businesses continue to be positive about their own prospects but rising majorities expect ‘bad times’ for the Australian economy’s performance over the next year and next five years
- An increasing plurality of businesses, 39.9% (up 0.2ppts), said the business is ‘better off’ financially than this time a year ago while just under a third, 31.9% (down 2.1ppts), said the business is ‘worse off’;
- Businesses are still broadly positive about their own prospects for the next year with 41.5% (down 2.9ppts) of businesses, expecting the business will be ‘better off’ financially this time next year, while just over a quarter, 26.2% (up 1.7ppts) expect the business will be ‘worse off’;
- However, an increasing majority of businesses, 57.1% (up 2.9ppts) expect ‘bad times’ for Australia’s economic performance over the next year while under half, 42.2% (down 1.4ppts), expect ‘good times’;
- Businesses are even more negative on the longer-term outlook for the Australian economy with an increasing majority of 59.3% (up 7.6ppts) of businesses expecting ‘bad times’ for the Australian economy over the next five years (the highest figure for this indicator for over two years since July 2020) while only 36.7% (down 5.4ppts) expect ‘good times’ over the next five years – the lowest figure for this indicator for over two years since September 2020.
- Businesses are split on whether to invest in growing their business with 43.7% (down 1.1ppts) saying the next 12 months will be a ‘good time to invest in growing the business', while a slim plurality of 46.9% (up 0.3ppts) said it will be a ‘bad time to invest’ in growing the business.
Michele Levine, CEO of Roy Morgan, says Business Confidence fell in October after the RBA raised interest rates for the sixth straight month, up by a total of 2.5% points since May, the fastest increase to interest rates for nearly thirty years since 1994:
“Roy Morgan Business Confidence fell 4.1pts to 96.6 in October, all but reversing the increase of 4.7pts in September, as business became significantly more worried about the performance of the Australian economy over the next year and next five years.
“Now clear majorities of 57.1% (up 2.9ppts) of businesses expect ‘bad times’ for the Australian economy over the next year, and 59.3% (up 7.6ppts), expect ‘bad times’ over the longer-term of the next five years.
“The concerns about the future performance of the Australian economy are not surprising after the ABS announced the official inflation rate of 7.3% for the year to September 2022 – the fastest rate of inflation for over 30 years since June 1990.
“The high, and rising, level of inflation has led to the RBA increasing interest rates by a total of 2.75% since early May – the fastest set of increases since the RBA increased official interest rates by a total of 2.75% in only five months in 1994.
“All the indications are there will be further interest rate increases to come as inflation is set to increase again over the next few months with energy prices continuing to increase and flooding in many parts of Australia causing crop shortages and rising food prices.
“Treasurer Jim Chalmers’ first Federal Budget, handed down in the final week of October, has not had an impact on this month’s Business Confidence but we will be watching the figures for November to see whether the Budget has any impact on sentiment – either positive or negative.
“On a State-based level Business Confidence is now in positive territory and above 100 in Western Australia (112.0), New South Wales (103.0) and Tasmania (100.5) – although all are down on a year ago. In contrast, the index is significantly lower in South Australia (92.7), the flood-hit Victoria (89.3) and lowest of all in Queensland at only 85.3.
“At an industry level it is the same industries flying high in September-October 2022 that have been performing well above average this year. The Mining industry has the highest Business Confidence at 120.9, up a massive 44.2pts (+57.6%) on a year ago.
“Resource companies have benefited from increased demand for energy products in the wake of Russia’s invasion of Ukraine as well as the rebounding world economy as countries have re-opened this year. Australia’s trade surplus so far this year has totaled over $100 billion in the nine months to September 2022 based largely on booming resource exports of gas, coal and iron ore.
“Education & Training is clearly the second most confident industry at 119.6 – over 20% above the national average as the end of pandemic restrictions this year has allowed international students to return to Australia in big numbers.
“Accommodation & Food Services is at 113.3, almost 15% higher than the national average, and has been a huge beneficiary of the relaxation of pandemic restrictions as Australians who have had to defer travel plans for two years have finally been able to move around the country freely again.
“In contrast there are four industries for which Business Confidence is lagging more than 10% below the national average including Finance & Insurance, down a massive 43.8pts (-39.8%) on a year ago to 66.1, Public Administration & Defence, down a large 40.4pts (-33.8%) to 79.0, Electricity, gas & water, down by 9.9pts (-10.2%) to 87.3 and Construction, down by 6.8pts (-7.2%) to 87.3.”
The latest Roy Morgan Business Confidence results for October are based on 1,693 detailed interviews with a cross-section of Australian businesses from each State and Territory. Detailed findings are available to purchase on a monthly or annual subscription as part of the Roy Morgan Business Confidence Report.
To learn more about Roy Morgan’s Business Confidence, Consumer Confidence and Inflation Expectations data call (+61) (3) 9224 5309 or email askroymorgan@roymorgan.com.
Margin of Error
The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.
| Sample Size | Percentage Estimate |
| 40% – 60% | 25% or 75% | 10% or 90% | 5% or 95% | |
| 1,000 | ±3.0 | ±2.7 | ±1.9 | ±1.3 |
| 5,000 | ±1.4 | ±1.2 | ±0.8 | ±0.6 |
| 7,500 | ±1.1 | ±1.0 | ±0.7 | ±0.5 |
| 10,000 | ±1.0 | ±0.9 | ±0.6 | ±0.4 |
| 20,000 | ±0.7 | ±0.6 | ±0.4 | ±0.3 |
| 50,000 | ±0.4 | ±0.4 | ±0.3 | ±0.2 |
