Australian businesses aren’t as confident as they used to be

Daniel Greig of Australia falls while competing during the Men’s 500 metre race at the Winter Olympics. (Paul Gilham / Getty Images)
  • NAB’s monthly survey of Australian businesses showed conditions worsened in October, while business confidence fell to a 2018 low.
  • The biggest fall was seen in the sub-index for employment, although NAB economist Alan Oster still expects Australia’s labour market to remain strong.
  • Key leading indicators – forward orders and capacity utilisation – held steady at or near their long-run averages during the month.

NAB’s latest monthly survey showed sentiment among Australian businesses declined in October.

Business conditions fell to a reading of +12 (down from +14), while the confidence gauge fell to +4 (down from +6) — a 2018 low.

“Although conditions have eased since earlier in 2018, and have been a little volatile over recent months, business conditions remain well above average,” NAB chief economist Alan Oster said.

A summary of the key findings:


Of particular note in the above table was the employment measure, which had the biggest fall among the major sub-indexes.

NAB’s employment component can be seen as a leading indicator of labour market strength, and has been tracking strongly for most of the year.

However, Oster said that despite the fall, the survey results still suggest Australia’s economy will continue to add around 20,000 jobs per month.

In addition, the October decline “comes after a run of strong gains in the labour market”.

“We will watch this closely over coming months to see if this is just a temporary pause or a sign of a more durable slowdown in the labour market.”

Elsewhere in the report, Oster said key forward-looking indicators appear to have stabilised in recent months.

The forward-orders index, seen as a gauge of business expectations around future demand, held steady at +3, unchanged from the previous month and slightly above its long-term average.

Capacity utilisation — a measure of industry productivity — “edged lower for the second month in a row, but remains at a high level after trending up over recent years”, NAB said.

By industry, the decline in business conditions was broad-based during October with the exception of three sectors — construction, wholesale and transport & utilities.


In trend terms, business conditions in the mining sector remain the highest, followed by finance and business & property services.

By state, business conditions remain strongest in the eastern states, led by Victoria (+17), then Queensland (+15) and NSW.

“The survey continues to point to a healthy business sector, with profitability and trading conditions remaining high, and forward looking indicators still favourable,” Oster said.

“Overall, the survey fits our view that the labour market remains healthy, growth is solid but that wage and price pressure remains subdued in the economy more broadly.”