The June 2025 NAB Business Survey indicates a positive shift in Australia’s economic landscape, with business conditions improving. The overall business conditions index rose to +9, driven by strong gains in trading conditions, profitability, and employment. This rebound suggests that businesses are beginning to recover from earlier sluggishness, with manufacturing and retail sectors in particular showing strength after previous declines.
Business confidence also improved, rising by 3 points to +5, its highest level in over a year. This optimism is most evident in the construction sector, while retail and wholesale continue to lag. Capacity utilisation increased for the second consecutive month, reaching 83.3%, which is well above the long-run average. This indicates that businesses are operating closer to full capacity, a positive sign for future investment and credit demand.
| |
April 2025 |
May 2025 |
June 2025 |
| Labour Costs |
1.5% |
1.6% |
1.5% |
| Purchase Costs |
1.6% |
1.2% |
1.5% |
| Final Product Prices |
0.7% |
0.5% |
0.6% |
| Retail Prices |
1.2% |
1.0% |
0.6% |
Source: NAB Business Survey, June 2025
Forward orders continued to trend upward, approaching long-run averages, and capital expenditure rose, reflecting a growing appetite for business investment. Cost pressures remained relatively contained, with labour cost growth easing slightly and final product prices increasing modestly. Retail price growth also softened, suggesting some relief from inflationary pressures.
These positive indicators in the June survey support the RBA’s decision to keep the cash rate on hold at 3.85% this week. A surprise for markets, this decision reflects the RBA’s desire for more certainty that inflation is sustainably tracking toward its 2–3% target range. While headline inflation has moderated and real household incomes have improved, the Board opted to wait for more comprehensive data before easing further.
The RBA’s pause comes amid signs of resilience in domestic demand and easing financial stress, although some sectors continue to struggle with weak pricing power and high unit labour costs. Labour market conditions remain tight, with low underutilisation and persistent constraints on labour availability. Markets now anticipate a rate cut in August, contingent on upcoming inflation data.
Meanwhile, global markets remain attentive to Trump’s tariff moves following this week’s deadline extension to August 1, reflecting broader concerns about intensifying trade tensions amid fragile demand and cautious central bank policy shifts.
Source: NAB Monthly Business Survey, June 2025
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