In May, business confidence decreased by 2.3 points, according to Roy Morgan, bringing the index to 97, just below the neutral level of 100.

This decline follows an underwhelming federal budget, which has left businesses less optimistic about the immediate future.

Mixed sentiments among businesses

The survey revealed mixed results, with businesses showing less confidence in the next 12 months and their investment prospects. However, there was a slight improvement in the long-term outlook for the Australian economy over the next five years.

A notable 42.6% of businesses now believe the next 12 months is a “bad time to invest in growing the business,” up 6.1 points from April. Only 38% consider it a “good time to invest,” the lowest in over four years.

Despite short-term concerns, 32.4% of businesses expect “good times” for the Australian economy over the next five years, a 3.1-point increase from a record low in April. Meanwhile, 55.2% anticipate “bad times,” down 5.3 points.

Regional variations in business confidence

Business confidence varies significantly across Australian states.

Western Australia remains the most confident at 110.2, despite a significant drop from last year. South Australia saw the largest annual increase, rising 19 points to 101.6. Victoria and Queensland also showed substantial gains, though they remain below the neutral level.

Industry performance

Several industries remain optimistic, with professional, scientific, and technical services leading at 113.8, followed by education and training at 113, and finance and insurance at 110.9.

However, transport, postal, and warehousing continues to lag at 74, experiencing the largest decline of any industry.

Insights from Roy Morgan

“The results show that businesses were not impressed with Treasurer Jim Chalmers’ federal budget, and there was no boost to confidence,” said Michele Levine (pictured above), CEO of Roy Morgan. “This should not be a surprise as a look at historical trends shows business confidence has now declined in nine out of 14 years in May following the federal budget.”

She said the primary factor behind the decline in May was businesses’ outlook for the next year.

“Only 38% of businesses say the next 12 months will be a “good time to invest in growing the business,” the lowest figure for this indicator since April 2020,” Levine said. “In contrast, 42.6% say the next 12 months will be a ‘bad time to invest.’”

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