Business confidence wavers amid Budget instability

Uncertainty around the Federal Budget has taken a toll around business confidence, dropping by three points (2.5 per cent) in August to 116.1, according to Roy Morgan research.

The marginal drop comes amidst a decline in the number of businesses feeling that economic conditions would improve in Australia over the next year, and next five years.

The number of those feeling they would be financially better off in 12 months has also dipped.

"The decrease in business confidence in August was expected given the continued uncertainty surrounding the Budget issues, the declining outlook for the mining industry and mixed messages about global recovery and political instability," Roy Morgan industry communications director Norman Morris said.

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"The full impact of the Budget is yet to be seen with problems getting it passed by the Senate and compromises which are likely to reduce confidence in the government. Continued instability and uncertainty is not a good environment to make business decisions."

Finance and insurance was the most confident sector in the August quarter at 134.9, followed by rental, hiring and real estate services at 132.6.

Sectors that were expected to boost the economy performed below par, with retail at 101.5, construction at 109.9 and manufacturing on 102.3.

Morris said banks will need to enhance their customer dealings with businesses when the desire to borrow increases, as this is well below satisfaction levels of personal customers with banks.

"It is obvious from this that banks and businesses will need to work more closely with each other if they are to achieve a positive outcome for all parties and the economy," Morris said.