Australian business confidence has collapsed at a pace only seen during the GFC and COVID, highlighting the immediate impact of Middle East tensions on sentiment. NAB Business Confidence plunged from 0 to -29 in March, marking the second-largest monthly decline in the survey’s history. As NAB’s Gareth Spence noted, declines of this magnitude have “previously only been seen in the GFC and the onset of COVID,” underscoring the severity of the shock.
However, the breakdown in confidence has not yet translated into a sharp deterioration in activity. Business Conditions were little changed at 6, suggesting the economy is still carrying underlying momentum. Spence emphasized that “while the global news backdrop has impacted sentiment, it is still early days in terms of the flow through to activity,” pointing to a lag between sentiment and real economic performance.
At the same time, inflation pressures are already building. NAB reported that purchase cost growth more than doubled to 3% on a quarterly basis, while product price growth rose to 1.1%. Spence noted the impact on costs and prices has been “immediately obvious,” reinforcing the view that the shock is feeding directly into the inflation pipeline.
