Australian business conditions remain close to the boom times of the mid-2000s but confidence has slipped. According to NAB’s latest monthly business survey of 400 firms in late August, its Business Conditions Index rose 1 point to 15 from a revised reading of 14 in July, while its Business Confidence Index slumped 7 points to 5.
The fall in confidence was driven by customer demand, margin pressure and government policy. Energy costs also featured while geopolitical risks were well down the list. In spite of the large fall, confidence in all of the industry sectors remained positive.
The capacity utilisation rate, generally accepted as an indicator of future investment expenditure, slipped from 81.9% to 81.6%. Sector capacity utilisation was close to or above long-term averages for all sectors of the economy except for mining and transport and utilities. In a curious turn, spare capacity in July had been lowest in the transport/utilities sector but in August this position reversed significantly.
