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Australian Business Confidence Edges Up in May but Remains Deeply Negative

Weak profitability, falling capacity use, global shocks, market volatility have pushed policymakers toward a June rate hold with the option of another increase later in the year.

Commuters queue for buses during peak hour outside Wynyard Station in Sydney, Australia, March 25, 2026. REUTERS/Hollie Adams/File Photo
A business sentiment survey will indicate how much cost pressures are being passed on to consumers. (Joel Carrett/AAP PHOTOS)
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Overview

  • NAB's monthly survey showed business confidence improved to -14 in May from -23 in April while the business conditions index held at +3.
  • The profitability sub-index is the furthest below its long-run average, signalling persistent margin pressure for firms across all industries.
  • Capacity utilisation fell below 82% for the first time since early 2025, a reading that NAB says is consistent with softer economic momentum rather than outright contraction.
  • Markets expect the RBA to keep the cash rate at 4.35% at its June 15–16 meeting but have left open the chance of one more hike this year given mixed inflation and growth data.
  • Heightened global risks, including the Middle East conflict and a US-driven market selloff, have raised energy and shipping concerns and made Australian markets more sensitive to international shocks.