Economic commentary

October 14, 2025

Confidence gains while conditions hold steady

By NAB Group Economics

Overview

Business confidence rose 3pts in September, retracing the fall in August to be back above its long-run average. Business conditions were unchanged in September as improvements in trading conditions and profitability were offset by a fall in the employment index. The profitability index has now lifted 11pts since May, a positive sign for labour demand over the medium term. By industry, gains in mining, manufacturing, construction and transport were offset by falls in the services industries, retail and wholesale. One disappointing aspect of the survey was a 3pt drop in forward orders. Orders have now dropped below average and are back into negative territory. Nonetheless, the level of activity remains high, with capacity utilisation edging up further in September to its highest level since May 2024. Retail price growth, overall output price growth and purchase cost growth all rose marginally in the month but remain lower than seen at the start of the year. Labour costs growth edged lower in the month. Overall, both business confidence and conditions appear to be consolidating the improvements seen through mid-2025, suggesting that the private sector has maintained most of the momentum gained through H1 2025. The survey also continues to mirror the broader trends of a more gradual easing in price pressures in the economy.

Comments from NAB Chief Economist, Sally Auld

Business confidence rose 3pts in September retracing the 3pt (unrounded) fall in August, and is now sitting comfortably above the long-run average. This positive development has been consistent across the states, with all now sitting above their long-run average levels.

Business conditions were flat in the month as the gains in profitability and trading conditions were offset by easing in the employment sub-index.

“The September survey showed continuing positive results in the headline figures” said NAB Chief Economist Sally Auld. “Both business confidence and conditions appear to be consolidating just above their long-run average levels after improving through mid-2025”.

For business conditions, rises in mining, manufacturing, construction and transport & utilities were offset by a softening in conditions in the services sectors, retail and wholesale. In trend terms, the divergence in conditions across industries remained wide, with manufacturing weakest at -7 index points and recreation & personal services strongest at +15 index points (outside of mining which is strongest at +24 index points).

“Business conditions have improved through mid-2025 and are now just above average. However, the goods production and distribution industries remain notably weaker than both household and business services sectors.”

Forward orders fell 3 pts in September and are now below average and negative in trend terms. Capex also declined, falling 3 pts in September to be back at its long run average.

“While conditions held their ground in September and profitability continued to improve, forward orders fell and reported capex also declined. Overall, we believe that the survey shows that the economy has held onto the better momentum delivered in Q2.”

“Capacity utilisation also remains high as growth has improved, suggesting that despite the moderation in consumer inflation over the past year or so, cost pressures will likely remain a challenge for business in the near term.”

For further details please see the NAB Monthly Business Survey (September 2025) (PDF, 347KB)