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National Australia Bank’s (NAB) Business Survey, which has tracked confidence and conditions for more than 20 years, found business confidence fell four points to -13 index points in September, marking its third consecutive monthly decline.
The reading was 18 points below the survey’s long-run average, 22 points below what it was a year ago and ranked in the bottom 5 per cent of results in the survey’s history.
NAB head of Australian economics Gareth Spence said the survey results were “at a level rarely seen in the history of the survey outside of the GFC and the COVID period”.
“Businesses are being hit from three directions, the interest rate and inflation outlook at home, ongoing global uncertainty and elevated fuel and diesel costs,” Spence said.
“That degree of pessimism matters because it can shape hiring, investment and spending decisions, and points to a risk that activity softens further through the final quarter of the year.”
September’s result, however, is substantially higher than in April, when the reading plunged to -29 index points following the outbreak of the conflict in the Middle East. This was the second-largest drop in the survey’s history.
Business conditions unchanged
Business conditions were unchanged at -1 index point in September, with small increases in trading conditions and profitability offset by a three-point fall in the employment index.
The employment index fell to its lowest level in five years.
Queensland business conditions declined four points, bringing the state broadly in line with NSW and Victoria.
Western Australia remained an outlier, with trend business conditions at +16 index points, compared with -1 in Queensland, zero in NSW and -3 in Victoria.
“Queensland has now come back into line with the other large eastern states, where conditions are weak,” Spence said.
“Western Australia remains a very different story. Conditions there are a far cry from the rest of the country, even though businesses are facing many of the same pressures from costs, rates and global uncertainty.”
Capacity utilisation remains above average
Capacity utilisation eased 0.2 percentage points to 82.3 per cent in September but remained around one percentage point above its long-run average.
It increased across five of the eight industries surveyed, with trend utilisation above average in five industries.
“Capacity utilisation has remained above average for around four years, despite conditions weakening through 2026,” Spence said.
“How that tension resolves will be important for the RBA outlook. Capacity pressures and elevated input costs keep inflation risks in focus, while weak confidence, profitability and employment point to softer activity.”
Spence said the next NAB Spend Trend report would also be important in showing how consumers were responding to higher costs, interest rates and uncertainty.
“The next NAB Spend Trend will also be important in showing how consumers are responding to this mix of higher costs, interest rates and uncertainty.”
Businesses keep a close eye on cash flow
NAB group executive business and private banking Andrew Auerbach said the findings reflected what the bank was hearing from business customers across the country.
“Higher costs, softer demand and ongoing uncertainty are putting some businesses under real pressure,” Auerbach said.
“We’re seeing many business owners take a more cautious approach, keeping a close eye on cash flow and being more deliberate about where they invest.
“At the same time, businesses haven’t stopped looking for opportunities. Many are still investing where they can see clear demand and a clear return, even in a challenging environment.”
Indeed, despite the poor business conditions and confidence, business lending remains at record highs, with a particular focus on working capital facilities.
According to the Australian Prudential Regulation Authority’s Monthly Authorised Deposit-taking Institution Statistics, business lending totalled a record $1.28 trillion in September.
Another report published by the Australian Banking Association found 40 per cent of small and medium-sized businesses sought finance from their bank, while credit provided by banks reached a record $750 billion in April 2026, up from $567 billion in April 2023.
And banks such as the Commonwealth Bank of Australia, Australia New Zealand Banking Group, NAB, and Judo Bank have also recorded strong growth in their business lending books.
And according to non-bank SME lender Banjo, businesses are putting that credit to good use.
Banjo’s latest SME Compass Pulse survey found that more than half of SMEs achieved their revenue targets over the past 12 months, unchanged from six months ago, while 72 per cent expect to achieve or exceed their targets for the year ahead.
Speaking to Broker Daily, brokers have also commented on the growing interest in business loans, flagging a structural shift in the role and approach of those in the sector as business pressures and credit requirements shift.
[Related: Record mortgage broker share raises commercial question]
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