Private Credit Weekly Insights, 13 June 2025

The NAB Monthly Business Survey for May 2025 reveals a stagnation in Australian business activity, despite recent interest rate cuts aimed at stimulating the economy.​

The business conditions index declined by 2 points to 0, signaling a halt in growth and falling further below the long-term average of +6. This decline reflects ongoing challenges in profitability and trading conditions. Conversely, business confidence saw a modest improvement, rising 3 points to +2, marking its highest level in four months. However, this uptick remains subdued by historical standards, indicating that businesses remain cautious.

The retail sector continues to underperform, with both business conditions and profitability remaining weak. This is attributed to subdued consumer spending, despite the RBA rate cuts in February and May. Other sectors, such as manufacturing, mining, and wholesale, also reported declines in confidence, highlighting widespread economic softness.​

Employment indicators weakened, with the employment index dropping 4 points to 0, suggesting a potential softening in labour demand. Profitability remained negative, as businesses grapple with rising labour and purchase costs, which continue to squeeze margins. Despite these challenges, the unemployment rate has held steady around 4.1% over the past year, indicating some resilience in the labour market.​

Given the weak economic performance in the first quarter and ongoing pressures on businesses, markets anticipate another rate cut by the RBA in July. NAB economists expect the cash rate to be lowered to 3.1% by November, aiming to support the labour market and broader economic recovery. However, the persistent weakness in business conditions suggests that confidence may struggle to improve unless there is a significant turnaround in economic activity.

The May 2025 NAB Monthly Business Survey highlights a stalled business environment in Australia, with particular weakness in the retail sector and signs of softening labour demand. While business confidence has edged higher, it remains fragile amid ongoing economic uncertainties.

Source: NAB Business Survey, May 2025

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