Daily Commentary BY THE CURVE TEAM –

Shutdown Leaves Business Confidence in Tatters

15th of April, 2020

Containment measures that have shutdown large parts of the economy have destroyed business confidence.

Business confidence in Australia fell by the most on record in March. Containment measures which has seen large parts of the economy shut down saw the index fall to a record low of -66. The fall takes the level of confidence well below the lows seen during the depths of the Global Financial Crisis and shows how widespread the impact of the Covid-19 has been.

The shutdown has also had a significant impact on business conditions with it also posting its biggest monthly decline on record. Trading conditions, profitability and the employment index all fell heavily. A large fall in forward orders also adds to the very weak outlook for businesses. The conditions index is also below the trough seen during the GFC but not to the same extent as the conditions index.

How significant the impact of falling confidence is hinges on the duration of the shutdown, with the NAB report saying that:

“There is significant risk that a blow to confidence of this magnitude for an extended period could lead to ongoing fallout in terms of employment growth and capital expenditure by business.”

Today we will get the monthly update on consumer confidence. If the weekly survey complied by ANZ/Roy Morgan is anything to go by, we are set to see significant falls across the board when the results are released later this morning.

David Flanagan

Director - Interest Rate Markets