Aussie Business Confidence Rises to -24, Conditions Signal Contraction

The National Australia Bank's monthly business confidence index climbed five points to -24 in April, reversing only a sliver of the steep deterioration that has hammered sentiment since late 2024. The improvement from March's -29 reading provides a breather, yet the level remains deeply negative and well below the survey's long-run average of around +6.

The Australian dollar showed little reaction to the data, holding near the bottom of its recent range against the US dollar. Traders had priced in a dour reading and the modest uptick did nothing to alter the narrative that domestic demand is spluttering. Short-term rate markets continue to assign a meaningful probability to a Reserve Bank of Australia rate cut before year-end, keeping the AUD/USD pinned below the 0.6600 handle for much of April.

Confidence Snaps Five-Month Slide, Still Deeply Negative

The headline confidence index had been in freefall, deteriorating from +3 in November 2024 to -29 in March 2025. April's -24 therefore snaps a sequence of five consecutive monthly declines. That counts as a statistical reprieve, not a genuine recovery. A negative reading signals that the proportion of firms expecting conditions to worsen outweighs those anticipating an improvement. The -24 level implies that, for every business that sees a brighter six months ahead, roughly two expect things to get tougher.

Capacity utilisation, forward orders, and employment intentions – sub-components tracked inside the NAB survey – all pointed lower in March. April's detailed breakdown has not yet been released. When it lands, traders will scrutinise the employment gauge closely. The RBA has repeatedly flagged that a resilient labour market is the last bulwark keeping the cash rate on hold at 4.10%. Any cracking in hiring intentions would accelerate the pivot narrative.

Business Conditions Point to Weaker Activity Momentum

The business confidence print is a forward-looking sentiment measure. The survey's separate conditions index, which tracks actual sales, profitability, and employment, has been sending an even more urgent signal. NAB reported that business conditions dropped to 3 in March, flirting with the contraction zone. That reading was the weakest since the early pandemic months and consistent with an economy losing momentum faster than the RBA's central forecast assumes.

When confidence and conditions are both weak, inventory accumulation tends to stall and capex plans get shelved. Australia's GDP growth for the fourth quarter of 2024 came in at a tepid 0.3% quarter-on-quarter. The first-quarter 2025 print is due in early June. The NAB survey trajectory suggests downside risk to that number. A negative quarter would fuel headline calls for an immediate rate cut, even as trimmed-mean inflation remains sticky above the 2-3% target band.

RBA Policy Path and the Next Catalyst

The central bank's May board meeting minutes are published on 20 May. They will show how much weight policymakers assigned to the soft business survey relative to the hotter-than-expected first-quarter consumer price index. Retail electricity prices jumped in April, complicating the disinflation picture, as detailed in our note on the retail price jump. A divided board would keep two-way risk elevated for the Australian dollar.

For forex traders, the immediate layer to watch is the 0.6450-0.6500 support zone in AUD/USD. A clean break below that area, driven by a further slide in business conditions or a sudden rise in the unemployment rate, would open the door to a test of the 2024 lows near 0.6350. On the upside, the pair needs a weekly close above 0.6620 to signal that the market is repricing the RBA's easing timeline.

Positioning data from the weekly COT report shows speculative accounts are already net-short Australian dollars, reducing the scope for a sharp capitulation on further weak data. That concentration of short positions is itself a risk: any upside surprise in the May employment report could force a rapid squeeze. The 15 May labour-force release therefore looms as the next binary event for the Aussie dollar.