AUSTRALIA DATA: Business Conditions Ease, Trend Steady, Labour Costs Lower

The Australia Jan NAB business survey saw conditions moderate to +7 from +9 in Dec last year. Business Confidence was at +3 for Jan, slightly up from a revised +2 reading for Dec last year. The conditions index, which has a reasonably relationship with GDP y/y (see the chart below, the NAB conditions index is the the white line), has largely gone sideways since the middle of last year. It is still suggesting better y/y growth momentum, but to be confident in expecting growth beyond +3%y/y. 

• We might need to see the conditions index trending above +10 for a number of months. This is not what the latest RBA projections show. The central bank has GDP y/y edging up to 1.8% in Q4 last year before slowing to 1.6y/y and then staying there for the rest of the forecast horizon.
• The longer average for y/y growth is around 2.3%, but the RBA projections imply a need for softer growth momentum to aid the inflation return to target.
• In terms of the detail of the NAB survey, the trading and profitability sub-indices eased. Employment was steady at +5, while labour costs moderated to 1.3% from 1.7% prior. This is a soft result and looks to be the weakest since 2021.  

Fig 1: Australian NAB Business Conditions Index & Australian GDP y/y 

Source: NAB/Bloomberg Finance L.P./MNI