Australian businesses have been hit by a sharp deterioration in sentiment even as day‑to‑day trading conditions hold up.
NAB’s March Monthly Business Survey shows confidence plunging to its lowest level since April 2020, driven by the Middle East conflict, higher fuel prices, and recent RBA rate hikes.
Westpac economist Luka Belobrajdic notes that “business confidence collapsed a staggering –29pts from a neutral reading in February”, taking the index deep into negative territory and well below its long‑run average.
The timing and scale of the drop largely mirror the slump already seen in consumer sentiment, with the Westpac‑MI index down 12.5% in April to 80.1, its steepest fall since COVID.
Despite the hit to sentiment, overall business conditions in March were unchanged at +6 index points – only slightly below average – indicating many firms are still reporting reasonable trading, profitability and employment.
NAB's Michael Hayes, Gareth Spence, and Sally Auld highlight that “capacity utilisation rose to 83.1%, remaining well above its long-run average”, suggesting businesses are operating close to full tilt even as they grow more wary about the outlook.
However, cost pressures are intensifying quickly. According to Westpac’s analysis, “Purchase cost growth saw its largest monthly increase on record”, with quarterly growth jumping to 3.0%. Firms have lifted prices, but not enough to fully offset higher fuel and other input costs, pointing to mounting margin pressure and a softer profitability reading.
Leading indicators are less reassuring. NAB reports that forward orders slipped back into negative territory, consistent with the collapse in confidence and suggesting softer demand ahead. Employment conditions remain positive for now, but Westpac warns that “signs of significantly weaker labour demand are likely to emerge later this year” as the shock to sentiment and activity feeds through.
For mortgage brokers, the message is that businesses are still trading, hiring, and investing – but are increasingly cautious. That combination may support near‑term credit demand, while also requiring closer attention to cash flow, serviceability, and sector‑specific risks as 2026 unfolds.
For more information, read NAB’s March Monthly Business Survey report and Westpac’s commentary.
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