Overview

Business conditions eased slightly in April, driven by weaker profitability. Confidence on the other hand, improved, but remains in negative territory and below its long run average. Despite the modest moves in headline confidence and conditions, there were some notable movements in other survey metrics this month, including a sharp decline in capex (falling to its lowest reading since June 2024), a decline in profitability and softer forward orders. The sharp rise in capacity utilisation recorded in March was also reversed; this measure fell to 81.4% and is now back at long-run average levels for the first time since mid-2021. While labour cost growth was steady this month, there was an uptick in purchase cost growth as well as higher final product price growth and retail price growth. Timing wise, the survey was fielded about three weeks after the initial ‘Liberation Day’ tariff announcements, which may explain the modest moves in headline business conditions and confidence. Forward looking indicators in the survey such as capex and forward orders will be in focus to understand the impact of global uncertainty on business decision making in Australia.

Comments from NAB Chief Economist, Sally Auld

Business conditions eased slightly in April. By industry, there were significant declines in mining and transport & utilities which reversed gains seen in March.

“The decline in business conditions was driven by weaker profitability,” said NAB Chief Economist Sally Auld. “This aligned with higher purchase cost growth and weaker trading conditions reported in April.”

Business confidence improved slightly, though remains in negative territory and below its long run average. Confidence by industry was mixed, but remains weakest in retail and wholesale.

“The survey was fielded a few weeks after the initial tariff chaos in early April which may explain the relatively steady conditions and confidence measures,” said Dr Auld.

However, there was more movement in other parts of the survey. Capex fell a notable 6pts to +1 index points in April, now back below the long-term average. Forward orders also eased.

Capacity utilisation fell to 81.4%, reversing the uptick seen in March. This is the first time that capacity utilisation has returned to its long run average since mid-2021.

“We have seen capacity utilisation gradually ease since 2022 as the economy has slowly achieved better balance,” said Dr Auld. “We have also seen a similar dynamic in our quarterly survey, where labour and materials as a significant constraint on output have broadly eased.”

Purchase cost growth picked up from 1.4% in quarterly equivalent terms to 1.7%, while labour cost growth was steady. Final product price growth and retail price growth both picked up this month, rising to 0.8% and 1.4% respectively.

“Overall, both business conditions and confidence remain weak relative to average levels, highlighting the risk that the economy is struggling to maintain the pick up in momentum we saw in the last quarter of 2024. We will continue to monitor how business sentiment develops in coming months in light of heightened global uncertainty and domestic developments.” said Dr Auld.

For more information, please see the NAB Monthly Business Survey (April 2025)