Australian Business Conditions Slip to Six-Year Low in August

Australian business conditions deteriorated to their weakest level in six years during August, according to a survey released on Tuesday by National Australia Bank (NAB). The bank's business conditions index dropped five points to -1, marking the first time the gauge has fallen into negative territory since the onset of the pandemic in 2020.

The decline was broad-based, with the profitability sub-index plunging 10 points and sales falling five points, both reaching post-COVID lows. Business confidence also weakened, slipping one point to -8, well below its long-run average of +5.

NAB noted that the sharp fall in profitability warrants close attention, given its historical link to broader labour market conditions. The bank described the overall survey signals as pointing to slowing growth amid persistent cost and price pressures.

Cost measures remained elevated in August, with fuel prices rising as tensions in the Middle East escalated once again. NAB highlighted that the gap between purchase cost growth and product prices is at historically high levels, indicating businesses are facing increasing strain on their margins.

The survey comes amid speculation that the Reserve Bank of Australia may need to raise interest rates for a fourth time this year, potentially as soon as this month, as inflation remains stubbornly high.