Political uncertainty – at home and abroad – appears to be weighing heavily on business confidence, which has reached a new low according to one confidence index.
The Small Business Confidence Index produced by Momentum Intelligence came in at a reading of 28 points (out of a possible plus or minus 100 points).
While that figure indicated positive confidence among Australia’s SME owners and operators, the results look much less rosy when put into the context of past readings.
Since the quarterly index began in September 2016, the reading has been on a downward trend, and is now almost half that of the initial reading (52 points).
Leading this decline in sentiment is cash flow, which has fallen from a reading of 60 points in the first quarter of the 2017 financial year (September 2016) to just 25 points as at June 2018.
Profitability has also fallen sharply, down from 56 points to 29 points over the same period.
Sentiment around business revenue has also fallen, albeit much less steeply – from 65 points to 43 points.
Capital investment was the only measure of business sentiment that did not reach a new low in the last quarter of the FY2018, coming in at 18 points. That compares with an initial high of 25 points and a low of just 12 points, recorded in the third quarter of FY2017.
The index tracks similar findings to business sentiment surveys conducted by Westpac-Melbourne Institute and Trading Economics, both which recorded a demonstrable confidence crash since 2016.
However, all of these readings pre-date the Canberra leadership crisis that toppled Malcolm Turnbull as prime minster, and the out-of-cycle interest rate hikes imposed by most Australian banks.
The latter has already been blamed for a slump in consumer confidence, particularly given that it coincides with a period of house price falls in most Australian property markets.
This fall in confidence going forward may suggest the alarming rates of disillusionment among business owners identified in a recent My Business poll.
Momentum Intelligence is associated with Momentum Media, publisher of My Business.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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