Business confidence among Australia’s largest listed firms has fallen sharply over the June quarter, undermined by the tight federal budget and coinciding with a reluctance to spend.
The outcome is at odds with a separate report from ANZ-Roy Morgan that indicates consumer confidence has finally recovered from the blow dealt by the Treasurer’s fiscal consolidation.
According to National Australia Bank’s quarterly ASX300 business confidence survey, which records the top 200 Australian stocks, plus the top 100 small caps, confidence has fallen to +3 points from +11, a decrease of 9 points. General business confidence is +4 points.
Export sales came off 2 points to +5 points due to the high Australian dollar, but still remains at elevated levels, the report said.
“The history of this survey is that in the past, the big guys tend to be better at picking the trend,” Alan Oster, NAB’s chief economist said.
The fall in confidence was driven by concerns over tax and spending changes in May’s federal budget, and has also been accompanied by a decrease in the big firms’ capital expenditure, while general capex has increasing.
“The fall in confidence in the ASX is greater than the general economy, and while trading and profit measures are better than the general economy, employment is worse,” Mr Oster said.
“Trading conditions and profitability remain at high levels but were not translated into better labour market outcomes - with employment in large firms falling 6 points to -4 index points.” the survey said.
Most firms expect the weaker labour market conditions to continue, and for business conditions to remain static for the coming year.
NAB’s chief economist Alan Oster says the fall in confidence is reflective of the different environment large Australian firms operate in.
“You do get a different story when you ask the big guys, rather than the small guys,” he said.
In general, the ASX 300 firms reported better trading conditions in each industry than the broader economy, with the most positive performers being the retail and recreational and personal services and banking sectors.
The decline in business confidence meanwhile was driven by retail, manufacturing and mining, while a high dollar and soft commodity prices may have had an impact, the report said.
“Relative to the broader economy, confidence in ASX 300 firms is much stronger in the recreational and personal services sector, and also more positive in finance, wholesale and retailing,” the survey said.
“But confidence is relatively weaker in ASX 300 construction firms than construction firms more generally.”
According to National Australia Bank’s quarterly ASX300 business confidence survey confidence has fallen from to +3 points from +11.
