Business confidence takes further knock as consumer confidence turns ‘subterranean’

Thursday, 27 June 2024

Business confidence has been sapping since January after a post-election bounce.

Businesses’ confidence in the economy has taken a further knock and consumers’ confidence is “subterranean”, according to two surveys released by ANZ on Thursday.

The silver-lining may be some increased hope for earlier interest-rate cuts.

ANZ reported a net 5% of businesses it polled in June were optimistic about the economic outlook over the year ahead, down from 11% in May, though that still kept its confidence index in positive territory.

Its business confidence index has swung sharply from a record net 70% of businesses being pessimistic about the outlook at the end of 2022 to a net 37% being optimistic in January, but has since been on the slide.

ANZ said every sector except agriculture was reporting weaker activity than a year ago and the signals for economic activity in the three months to the end of June were “extremely weak” despite the economy inching out of recession in the first quarter.

Chief economist Sharon Zollner said the bank viewed the survey results as evidence that the Reserve Bank’s “medicine” to bring down inflation was working.

“Low turnover is a particularly weighty issue for the retail and manufacturing sectors. The turnaround in labour shortages is evident across all sectors.”

Zollner said ANZ was optimistic the Reserve Bank would be in a position to cut the official cash rate “considerably earlier than August next year, as they currently expect”.

A net 39% of consumers were pessimistic about the one-year economic outlook, a small further deterioration from the net 36% figure ANZ recorded last month.

Underlining the state of the doldrums, a net 8% of consumers also believed the economy would be in worse state than now in five years’ time.

“Those with mortgages remain much more downbeat about their current financial situations and thus cautious about buying a major household item, but they are more optimistic about their personal financial situation a year from now,” ANZ said.

ANZ said the latter finding was probably because people with mortgages were expecting interest rates to fall.

Its surveys came on the back of a quarterly survey released by Westpac last week that showed consumer confidence back near historic lows.