Downturn In Mining Investment Will Have Domino Effect On Other Sectors

The latest business confidence survey suggests that the downturn in mining investment in Australia will have a domino effect in other sectors over the next five years, according to analysts from Roy Morgan Research.

Norman Morris, Roy Morgan’s Industry Communications Director said the disappointing results of their latest business confidence survey could not be attributed to any one factor.

“The decline in business confidence during February was most likely a result of continued uncertainty regarding the level of the budget deficit, difficulties getting elements of the budget expenditure cuts past the Senate, wrangling over leadership, negative employment outlook, global economic issues (including much focus on Greece and China), as well as a general ambivalence in Australian 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.

According to the survey the level of business confidence in this country has fallen 9.2 points in a month (from 114.9 in January to 105.7 in February) and is 22.5% lower than its peak of 136.3 in October 2013, immediately following the Federal Election.

“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 twelve months would be a good time to invest in growing their business’ is now down to its lowest level since September 2012. With a big drop in investment by the mining industry and the less positive outlook by other sectors for growth for the next five years, this will be a major concern for state and federal governments.

“The industries that it was hoped would make up for the decline in the iron ore price and mining investment continued to show a rather subdued outlook, and are unlikely to make up for the loss. Construction is now showing signs of weakness, with confidence now below average; while manufacturing has lifted slightly and retail is only average. The most positive major sectors are ‘finance and insurance’, ‘rental, hiring and real estate’, ‘information media and telecommunications’ and ‘personal, repair and other services’.