Australian Business Confidence Falls to -29 as Energy Costs Rise

The National Australia Bank's Business Confidence Index fell 29 points to -29 in March, down from 0 in February. The decline is the second-largest monthly fall on record and takes the index to its weakest level since the pandemic, the bank's monthly survey showed.

Reported business conditions remained positive at +6 in March, slightly below +7 in February. The sales index eased to +11 from +12, while the profits index declined to +1 from +4.

Purchase costs rose at about a 3% quarterly pace, driven in part by higher energy bills. Retail price growth slowed to 0.5% from 0.9%.

The Reserve Bank of Australia raised its cash rate to 4.1% in March. RBA official Hauser warned of a stagflation risk as higher fuel costs push inflation higher and growth slows, noting that interest rates must return inflation to the 2-3% target and that headline CPI could approach 5% in the second quarter. “I’m not sure interest rates are at the right level to tame inflation,” he added.

NAB's survey showed a widening gap between current activity and forward-looking expectations, with firms lowering their outlook amid rising input costs, higher energy bills and tighter monetary policy.

The survey reported margin pressure across several sectors, with businesses indicating higher energy and other input costs are not being fully passed on to customers. The results reflect a rapid and broad-based deterioration in sentiment among Australian firms in March.