NAB Monthly Business Survey¹
The August 2025 NAB Monthly Business Survey presents a cautiously optimistic outlook for the Australian economy, with several indicators showing signs of improvement or stability. Business conditions rose by two points, returning to levels around their long-run average. This uplift was primarily driven by gains in employment and profitability, although trading conditions remained flat. In contrast, business confidence dipped slightly, ending a four-month streak of improvement, but still sits close to its long-run average.
One of the most encouraging signs is the continued rise in forward orders, which entered positive territory for the first time in two years. This suggests stronger future demand and a more confident outlook among businesses. Capacity utilisation also increased to 83.1%, which is two points above the long-run average, indicating tighter supply-demand dynamics. Cash flow improved for the third consecutive month and is now around its long-run average, while capital expenditure also rose, reflecting stronger investment intentions.
Source: NAB Business Survey, August 2025
Sectoral and regional trends were also positive. Manufacturing and retail, typically sensitive to economic cycles, showed notable improvements in both conditions and confidence. Queensland continues to lead in business sentiment, while Victoria returned to positive territory for the first time since May 2024.
The lagged effects of recent interest rate cuts are beginning to flow through the economy, contributing to a more supportive operating environment for Australian businesses. Cost pressures are easing, with purchase costs growing at their slowest pace since 2021 and labour and product price growth remaining stable. This moderation in input costs is helping to sustain profitability and encourage renewed investment, particularly as businesses report improvements in forward orders, cash flow, and capital expenditure.
Looking ahead, the combination of stronger GDP growth, improving business conditions, and lower interest rates provides a constructive backdrop for Australian credit markets. However, the investment team remain mindful of uneven sectoral performance and global headwinds.
¹ NAB Monthly Business Survey, August 2025
*Past performance is not a reliable indicator of future performance.