Australian Business Sentiment Hits Six-Year Low

The broader index for business conditions fell 5 points to minus-1, driven by a sharp 10-point collapse in profitability and a 5-point slide in trading activity. Both metrics have now hit their lowest points since the pandemic began. NAB economist Michael Hayes pointed to the profitability index as a critical warning sign, noting its historical tendency to precede wider deterioration in the labor market.

This cooling sentiment mirrors a similar retreat among households, who are increasingly anxious about the Reserve Bank of Australia’s monetary policy. Governor Michele Bullock has signaled that additional rate increases remain likely as the central bank struggles to anchor inflation. With house prices also trending downward since May, the economic environment has grown increasingly precarious. Although cost pressures and price growth remain high, capacity utilization saw a slight reprieve, falling 0.6 percentage points to 82.5%.