Surveys conducted both by Roy Morgan and NAB have found the RBA’s decision to cut interest rates by 25 basis points to 2.25 per cent in February had not had the “desired effect” of boosting business confidence.
Roy Morgan reported a decrease of 9.2 points to 105.7 for its confidence index while NAB reported a drop in its index of three points to zero.
Both Roy Morgan and NAB highlighted that confidence levels are the lowest they have been since before the 2013 federal election, and “well below” the long-term average.
Roy Morgan industry communications director Norman Morris said the decline in confidence has been the result of a number of issues, including uncertainty regarding the level of the budget deficit, global economic issues and a “general ambivalence” in consumer confidence.
“The RBA rate decision not only failed to counter all these negative factors but possibly sends a message that they are concerned about the economic outlook for Australia,” Mr Morris said.
“Casting a shadow over the country’s economic growth prospects is the fact that businesses are now less confident about investing in expansion.
“The proportion of those who believe that ‘the next 12 months would be a good time to invest in growing their business’ is now down to its lowest level since September 2012,” he said.
NAB pointed out that confidence also fell across all industry sectors with the exception of manufacturing and wholesale.
“[This suggests] common factors such as political and broader economic uncertainty may be at play – perhaps the rate cut acted as a stark reminder of the significant headwinds facing the economy,” a statement from NAB said.
“Declines in confidence were most pronounced in mining (down 22), which is unsurprising given the current phase of the commodity cycle,” the statement said.
