Business confidence hits record low

It’s official – Australia’s entrepreneurs are more worried the state of the economy than at any time in the last 20 years.

It’s official – Australia’s entrepreneurs are more worried the state of the economy than at any time in the last 20 years.

NAB’s monthly business survey revealed business confidence has hit a record low of -29 index points, while business conditions also fell sharply to levels not seen since the slowdown of 2000-01.

NAB’s chief economist Alan Oster says the collapse in confidence is unprecedented.

“It appears that the continuing volatility in global equity markets, emergency financial packages, falling commodity prices, and continuing talk of global recession have finally broken business optimism and now fear reigns supreme,” Oster says.

“It is worth noting that confidence readings worse than the bottom of the 1990s recession has more to do with fear of the unknown than actual current outcomes.”

What makes the collapse in confidence even more remarkable is the fact that it is so widespread – even operators in the mining industry, perhaps best placed to weather the current downturn, are feeling pessimistic now.

As well they might.

Oster says business conditions data points to “a further sharp slowing in activity”, with the readings on trading conditions, profit conditions and employment conditions also falling in the last month.

Perhaps the most worrying trend is the fall in conditions for forward orders, which fell to recessionary levels in the manufacturing and retail sectors.

“That clearly is also not helping business confidence and will be reflected in future employment and business investment plans,” Oster warns.

As the credit crisis continues, NAB has also examined the ability of businesses to obtain credit. The data shows around 25% of companies are finding it more difficult to get funding (10% reported a significant increase in difficulties and 15% reported a slight increase), although around 35% of businesses claim they do not use funding.

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