The next move in the Reserve Bank of Australia’s cash rate is likely to be down, but the timing remains uncertain, according to the latest NAB Economics RBA Watch.
09 June 2026 | 3 min read
9 June 2026
Business confidence rose 10pts in May to -14 index points, lifting off a low base.
Business conditions held at 3 index points, below the long-run average.
Cost and price growth eased in May, though pressures remain elevated.
Cost and price pressures eased in May, while business confidence lifted off a low base and conditions held steady, according to the latest NAB Monthly Business Survey. Even so, confidence remains weak, with sentiment still negative across all industries and overall conditions continuing to track below average through 2026.
The survey showed business confidence rose 10 points to -14 index points in May, while business conditions were unchanged at 3 index points. Capacity utilisation fell to 81.9%, dropping below 82% for the first time in 12 months.
Forward orders rose 5 points and capex lifted 6 points. Purchase cost growth eased to 2.6% in quarterly equivalent terms, labour cost growth edged down to 1.5%, product price growth slowed to 0.9% and retail price growth eased to 1.5%.
NAB Head of Australian Economics Gareth Spence said the May survey suggests activity has slowed somewhat and that, while the Middle East cost shock has been significant, it has been less disruptive than first expected.
“The shock has clearly been significant, but so far it doesn’t look like the disruption to supply chains has been as bad as we had feared,” Mr Spence said.
“Conditions have eased since early 2026 but remain positive, and they are not as weak as confidence suggested a month ago. That supports the view that economic growth has slowed since late 2025 but is still moving. We see the same signs in our transactions data, where spending growth has slowed but not fallen away.”
“Confidence has lifted off a very low base, but it’s still weak and margin pressures are likely to remain a factor for businesses in the months ahead, even with some easing in costs growth this month.”
“Overall, for the RBA, an economy that was overheating appears to have cooled somewhat, with conditions and capacity utilisation trending lower this year as rates have risen. Weak business confidence, and how it flows through to investment and hiring decisions, will remain a key theme in the months ahead,” Mr Spence said.
NAB Group Executive Business and Private, Andrew Auerbach, said while customers were telling him they felt the pressures, they were also showing resilience.
“We've had more than half a million conversations with our customers since late February and what they're telling us is conditions are tough and cost pressures are real. But so is the resilience of Australian businesses, and we can see them actively adapting and pivoting,” Mr Auerbach said.
For more details, read the full May 2026 NAB Monthly Business Survey (PDF, 761KB).
