NAB Business Survey - Q1 2026: Conditions and Confidence down in Q1

Michael Hayes & Gareth Spence | Markets Research

Summary

Business confidence fell to -4 index points to its lowest level since December 2024. Business conditions fell 1pt to 7 index points with small declines seen across all three sub-components. Expected conditions for the next 3-months rose but fell over a 12-month horizon. Other forward-looking indicators were slightly more positive with both capex plans and forward orders edging up in the quarter. Capacity utilisation fell to 82.9% unwinding some of the rises seen over the past two quarters but remaining well above the long-run average. Wage costs remained the biggest issue affecting business confidence and the share of firms reporting labour as a significant constraint rose in the quarter, highlighting that the labour market has remained tight to start 2026. Overall, the Q1 survey shows that while confidence has weakened, conditions have broadly held up and that there remained some momentum in activity, though this survey largely predates the conflict in the Middle East.

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Details

• Business conditions fell 1pt to 7 index points. All three subcomponents unwound rises in the prior quarter to sit at or marginally below their Q3 levels. Conditions have largely sustained the gains made through 2025.
• By industry, conditions fell in all sectors except wholesale (+3pts), manufacturing (+2pts) and construction (+2pts). Despite falls in most industries in the quarter, conditions remained positive in 5 of 8 industries, with finance, property & business services the strongest, followed by construction.
• By state, conditions fell across all regions, however all remained at positive levels. Tas and Qld were the strongest states sitting at 14 and 12 index points respectively.
• Business confidence fell 4pts, to now sit 6pts below its recent peak. Confidence has retraced gains made over 2025 and is back around its end 2024 levels. Confidence was lower across all industries except mining, and is now negative in all industries except mining, manufacturing and construction.
• Leading indicators were mixed in Q1 and moves were generally small. Expected business conditions rose 2pts in the near-term but fell 1pt for longer-term expectations. Both forward orders and capex plans over the next 12-months rose (2pts and 1pt respectively). Capacity utilisation fell 0.4ppt from an 18-month high in Q4 to 82.9%.
• Constraints on output showed the share of businesses reporting significant constraints from both labour and premises rose for the third consecutive quarter. Business constrained by a lack of sales fell.
• Reported costs growth remained broadly steady – labour costs rose to 0.9% while purchase costs held at 1.0%.
• Retail price growth edged up 0.1ppt to 0.6% qoq. Final product price growth was flat at 0.4%.
• Wage costs were again the top issue affecting business confidence, followed by pressure on margins as the second most reported issue.

Next release date: 25 June 2026

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