Australia business confidence improves in May but stays deeply negative

Australia's business confidence improved modestly in May but remained deeply negative across all industries, according to the latest NAB survey. The index, while slightly higher than the previous month, still points to a pessimistic outlook among firms, with profitability being the weakest sub-component relative to its long-run average.

The data offers slim comfort for Reserve Bank of Australia watchers. The drop in capacity utilisation below 82%, the first such reading since early 2025, is consistent with an economy losing momentum. This adds to the case for the RBA to maintain an easing bias. However, cost pressures easing only slightly keeps the inflation picture complicated, particularly alongside the global energy price environment. The modest improvement in confidence is unlikely to force the RBA's hand, but the persistent negativity suggests that the central bank may need to consider further rate cuts to support growth. Live rates and charts on NowPrice show how the market is pricing in these expectations.

For markets, the data reinforces a picture of an Australian economy muddling through rather than deteriorating sharply. This is unlikely to trigger a significant policy shift from the RBA in the near term. Traders will watch upcoming inflation and employment data for further clues on the pace of easing. The capacity utilisation reading will be a key indicator to monitor for signs of further economic slowdown.