SYDNEY, March 11 (Reuters) – Business confidence in Australia declined in February, reversing gains from the previous month, despite a rate cut from the central bank, according to a survey released on Tuesday. The findings suggest persistent caution among businesses amid economic uncertainties.
The latest survey by National Australia Bank (NAB) revealed that the business confidence index dropped sharply by six points to -1, offsetting January’s brief improvement. Meanwhile, the business conditions index edged up slightly by one point to +4, though it remained below long-term averages.
“The boost in confidence observed in January did not carry over into February and has once again fallen well below average,” said Alan Oster, NAB’s chief economist. “This comes despite positive fourth-quarter GDP data and the Reserve Bank of Australia’s (RBA) rate cut, indicating that businesses remain wary about the economic outlook.”
The RBA reduced interest rates by 25 basis points last month to 4.1%, the first cut after more than a year of holding steady. However, policymakers have cautioned that further reductions are not guaranteed. Market expectations suggest a low probability of another cut in April, with an 80% likelihood of a rate move in May. Projections indicate rates could fall to 3.5% by year-end.
The survey’s breakdown showed mixed results: sales improved slightly, rising by one point to +4, and profitability increased by the same margin to -1. However, employment conditions softened, with the index slipping one point to +4, while forward orders remained unchanged at -3.
Despite the rate relief, businesses continue to face cost pressures. The survey noted a quarterly rise in purchase costs of 1.5%, up from 1.1% in the previous quarter. Meanwhile, retail price inflation held steady at 1% on a quarterly basis.
“Persistent cost pressures are squeezing business profits, keeping profitability conditions well below long-term averages,” Oster noted. “This is likely contributing to weaker overall business conditions and confidence.”
As businesses navigate an uncertain economic landscape, the latest data underscores the challenges in sustaining confidence even amid policy easing.
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