The January 2026 NAB Business Survey was conducted prior to the latest RBA’s decision to raise interest rates by 25 basis points, to 3.85%. The results from the survey show easing price pressures, reporting both cost and prices growth are moderating. This could present well for the near-term inflation outlook and supports the possibility that temporary factors and outliers could have played a role in the recent increase in inflation.
Business confidence improved slightly in January, lifting by one point, although remains just below its long-run average. Business conditions dropped, by three points, reversing the gains made in December. This was largely due to softer trading conditions and profitability, though in trend terms they both sitting modestly above average which is consistent with steady economic growth.
Importantly, costs and price pressures have eased further, falling to their lowest levels since the pandemic. Input costs are still rising faster than output prices; however overall inflationary momentum continues to moderate. Cost growth moderated across all categories, as demonstrated in the table below, which measures the percentage change at quarterly rate. All cost and prices growth measures are sitting at their lowest levels since 2021.
Source: NAB Business Survey, January 2026
Capacity utilisation has pulled back slightly although remains elevated and above average for most industries. Forward orders, rebounded strongly in January, presenting a positive forward-looking view from businesses. Private sector activity remains resilient and the continued slow down in prices growth is encouraging. Inflationary pressure is measured by both public and private spending, whilst the slow down in cost pressures reported in these business surveys is positive, the results may have a marginal effect to the ongoing inflationary pressures.
Next week’s CPI read will be closely watched to see whether or not inflationary pressures are sticky or if temporary factors have played a significant role. Either way, the RBA forecasts inflation sitting above their 2% - 3% target band for the remainder of 2026, may force their hand and result in further monetary policy intervention.