FX.co ★ Australia Business Sentiment Improves

Australia’s NAB Business Confidence Index rose to -14 in May from -24 in the previous month, its highest level since February and a sign of modest improvement from very weak conditions. Confidence nevertheless remained clearly negative, highlighting ongoing concerns about the economic outlook. Business conditions held steady at 3, ending a four-month decline as activity stabilised despite softer demand. Profitability remained the weakest component relative to long-run norms, indicating continued margin pressure from elevated costs. Cost growth eased but stayed high by historical standards, while capacity utilisation fell below 82% for the first time since early 2025, suggesting a loss of momentum. NAB economist Michael Hayes said sentiment was negative across industries, reflecting global uncertainty, a deteriorating domestic backdrop, and persistent cost pressures. Businesses also continue to grapple with high borrowing costs after the central bank raised interest rates to 4.35% in an effort to tackle sticky inflation and prevent rising energy prices from feeding through to consumer inflation.