May 13, 2024

NAB Business Pulse: May 2024

While challenges persist, the latest data shows the economy holding up. We examine the stats to give you the inside story.

From interest rates to inflation to business confidence, we take a look at the key numbers affecting Australian businesses this month.

Interest rate remains steady

With a recent reacceleration in US inflation suggesting US rates will stay on hold longer than expected, it’s worth noting that forecasts concerning our own cash rate haven’t changed. NAB Economics predicts the US Fedwill now move to cut its cash rate in September instead of June. However, it’s still expecting the Reserve Bank will leave our rates on hold until November, before cutting back to around 3.1% over 2025.




Inflation on track

First-quarter CPI figures are likely to show a slight uptick in underlying inflation to 0.9%, according to NAB Economics. However, the annual rate should continue to ease to 3.8% y/y – well off its peak of 6.8% in late 2022. Headline inflation, meanwhile, is still expected to drop to 2.6% by end-2025.





Business conditions holding steady

Our latest Monthly Business survey showed business conditions and confidence changed little in March, with conditions still above average while confidence remains a little low. There were some signs of improvement in retail, although the sector continues to report the weakest conditions in trend terms. The survey also sees tentative signs that supply and demand are coming into better balance, with capacity utilisation continuing to ease – if gradually and from a high level.




Labour market still tight

The labour market remains tight, with the unemployment rate at 3.8% in March and only modest easing in the jobs vacancy rate. In fact, vacancies still equate to around 2.4% of the labour force – well above the rate prior to the pandemic. Nonetheless, the expectation is for further labour market easing in the year ahead as population growth continues to outpace employment growth.







US dollar stronger for longer

The Aussie dollar has spent much of March and April trading in the US65c range. Our FX strategy team is now expecting the Aussie dollar to end the year at around the US69c mark, before drifting higher over 2025 to around US75c.