The December figures were based on 1,841 interviews across all industries, business sizes and locations across Australia.
The research found a significant decline in positive feelings about the direction of the economy in the next 12 months and next five years. There was also a small drop in the number of businesses planning to expand their businesses in the next 12 months.
The drop in confidence was seen mainly among micro-business, which fell 6.1 points to 123.3 and small business, down 6 points to 137.3.
Medium/large business confidence on the other hand increased by 0.2 points to 147.1, remaining at a historically high level.
All states except Western Australia experienced a drop in confidence, with NSW and Victoria suffering the greatest losses.
Mining is still the most confident industry at 160.7, up from 149.7 in November.
Retail declined from 131 in November to 123 in December, but is still sits around average.
Construction is now at 126.4, falling from 127.9 in November, while the agricultural sector remains well below average at 119.4 down slightly from 121.9 in November.
Roy Morgan Research industry communications director, Norman Morris, said the further decline in business confidence in December is to be expected as market realities hit, following the highs in September and October after the federal election.
Mr Morris said the November and December results were affected by considerable negative publicity regarding the economy.
“In November, there was extensive coverage of the budgetary situation and the need to lift the debt ceiling by two hundred billion dollars, which appears to have been a complete turn-around from the picture that was presented prior to the election,” said Mr Morris.
“The issues surrounding the Gonski school funding also created uncertainty and confusion around what the government was likely to change next,” he said.
According to Mr Morris, the confidence drop in December was impacted by Holden announcing it was closing its Australian manufacturing plant, large-scale retrenchments at Qantas and a $47 billion deficit presented by Treasurer Joe Hockey in the Mid-Year Economic and Fiscal Outlook.
He believes the decline of the ASX 200 by 5 percentage points in the first half of December reflected some of the negative feelings regarding the Australian economy, and although it recovered in the second half of December it demonstrated the uncertainty in the market.
“Despite these negative impacts, the level of business confidence in Australia remains above the average seen over the last three years and is above the level of December 2012,” Mr Morris said.
