Headline: Australia’s Business Conditions Reach 18-Month High as Costs Ease, Confidence Slips
Australia’s business backdrop strengthened in October, with operating conditions improving even as sentiment softened. The latest NAB Business Survey points to a resilient economy supported by stronger sales and profitability, while ongoing capacity strain and cost pressures continue to temper confidence. The results arrive as the Reserve Bank of Australia maintains a cautious stance on interest rates amid lingering inflation and firm domestic demand.
Business conditions rose to 9 in October, the highest reading since March 2024, up from 8 in the prior month. Momentum was driven by a five-point jump in the sales sub-index to +19 and a three-point rise in profitability to +9, while employment remained steady at +3. Cost growth continued to moderate, with purchase costs increasing at a 1% quarterly pace and labour costs at 1.5%. Capacity utilisation edged higher to 83.4%, highlighting ongoing tightness in production.
Despite the stronger operating backdrop, business confidence eased to 6 from 7. NAB’s Chief Economist Sally Auld noted that the economy has largely held onto the momentum built since late 2024, but elevated capacity utilisation and persistent wage and margin pressures are weighing on sentiment. With the RBA holding the cash rate at 3.6% earlier this month, the survey suggests the central bank may remain patient on rate cuts while inflation cools and cost pressures continue to ease.
Key Points – NAB October 2025 survey: business confidence dipped to 6 from 7 – Business conditions rose to 9, the strongest since March 2024 – Sales sub-index climbed to +19; profitability improved to +9; employment steady at +3 – Cost pressures eased: purchase costs +1% q/q; labour costs +1.5% q/q – Capacity utilisation increased to 83.4%, signaling tight production capacity – RBA kept the cash rate at 3.6%, reinforcing a patient approach to rate cuts
