Business conditions have lifted to their strongest level since March 2024, but sentiment eased and price pressures remain, according to the latest NATIONAL AUSTRALIA BANK LIMITED (ASX:NAB) Business Survey.
Echoing Reserve Bank deputy governor Andrew Hauser’s warning on Monday about limited spare capacity risking higher inflation, the survey pointed to a further tightening in capacity. NAB chief economist Sally Auld said private-sector momentum built in the first half of the year is still coming through, but lean capacity could see inflation re-emerge.
“Capacity utilisation remained high in October, and edged up to 83.4% to sit 2 percentage points above the long-run average,” Dr Auld said. “This suggests the risk that cost pressures re-emerge, should the better tone in the activity indicators in the survey be sustained. Economic growth has improved but we are starting at a point with little slack in the economy. Capacity utilisation is still high and wage and margin pressures continue to be significant factors impacting business confidence. Cost and price pressures in October are close to their historical long-run average rates, though a little above the immediate pre-pandemic period.”
Confidence slipped to +6 index points from +7, even as headline indicators of business health improved. Profitability rose to +9 from +6, capital expenditure lifted to +11 from +7, and forward orders swung into positive territory at +3 after −2 last month. “This is encouraging as it looks like not only has the economy maintained the improved momentum in the private sector gained in the first half of 2025, but also that private sector activity has strengthened a little further,” Dr Auld said.
Consumer sentiment turns a corner
Consumer sentiment also turned a corner. The Westpac–Melbourne Institute Consumer Sentiment Index jumped 12.8% to 103.8 in November from 92.1 in October — the first ‘net positive’ read since early 2022.
WESTPAC BANKING CORPORATION (ASX:WBC)’s head of Australian macro forecasting, Matthew Hassan, noted that a reading above 100 means optimists outnumber pessimists: “This is the first time this has happened since February 2022. Indeed, excluding the COVID disruptions in 2020 and 2021, this is the most positive result in seven years.”
Overall, sentiment is only marginally positive rather than exuberant, but the lift follows a prolonged period of consumer pessimism amid high inflation, elevated interest rates and rising tax payments.