Business conditions eased to their lowest level since Q3 2020. Falls in the trading and employment components were the drivers, while the profitability component remained weak. Business confidence trends are more positive, with another gain but it is still below its long run average. Forward looking indicators saw some modest gains, but remain on the soft side. Forward orders have clearly come off their trough but were still below their long-run average, while future capex intentions reversed a large part of the Q1 decline. However, there was a fall in the capacity utilisation rate. While capacity utilisation has been trending down it remains above its historical average. Other potential indicators of demand/supply imbalances also showed signs of moderating or were unchanged. The number of businesses indicating that labour availability remains a significant constraint again fell – that said, it is still high relative to pre-COVID levels and many businesses still flag it as an issue (even if now more minor). In line with this, while there was little movement in cost growth this survey, product prices have moderated; retail price growth was at its lowest since early 2021. Wage costs remained the top issue affecting confidence (but less so than in the recent past), followed by margins and federal government policies, with demand seen as less of an issue this quarter.

Survey Details

• Business conditions declined by 1pt (based on unrounded numbers), to 0 index points. Profitability remained negative at -4 index points, while trading conditions and employment both eased (by 2 and 1pts respectively).
• By industry, conditions fell most in finance (down 16pts) and retail (-13pts). There were notable gains in in mining (up 35 pts) as well as transport, business services and property. Conditions were weakest in retail, manufacturing and wholesale.
• By state, conditions eased NSW (down 4pts) and there were small falls in Qld and SA. They improved by 4pts in Vic and also nudged up in WA (but both remained negative). In level terms, conditions remain weakest in SA and Victoria, and strongest in Qld.
• Business confidence rose by 3pts (unrounded). While it is at a low -1 index points, this is the best reading since late 2022. The rise was broad based – with the largest gains in mining, finance construction and transport – but retail and wholesale confidence fell.
• Leading indicators generally showed modest gains. Expected business conditions (3 and 12-month horizons) rose 1pt, and forward orders by 2pts (unrounded). Capex plans over the next 12m rose 4pts but capacity utilisation declined to 82.3%.
• Constraints on output eased. The share of businesses reporting significant constraints from labour, sales, premises and material was either unchanged or declined. By historical standards, labour constraints remain an issue, although increasingly it is seen as a minor issue.
• Reported costs growth was little changed – labour cost ticked up 0.1ppts higher, while purchases costs edged down by the same amount.
• Retail price growth eased to 0.6% qoq, its lowest level since early 2021. Final product price growth remains more muted, and at 0.4% q/q was unchanged from recent quarters.
• Wage costs were again the top issue affecting business confidence, followed by pressure on margins.

For more information, please see the NAB Quarterly Business Survey (Q2 2025)