Australian business confidence drops on Middle East uncertainty

Australian business confidence has snapped three months of gains as uncertainty over the Middle East conflict and oil prices weighed on the outlook.

Business confidence slid further into negative territory in July, according to a new National Australia Bank survey on Tuesday. Conditions — a measure of profitability, sales and employment — recorded a small uplift.

The survey came just hours before the Reserve Bank is widely expected to stand pat after three consecutive interest rate rises so far this year.

The central bank is working to rein in stubbornly high inflation and began hiking interest rates even before the US attack on Iran in late February unleashed a global energy shock.

NAB said cost pressures “clearly remain an issue for business; labour cost growth, which was not affected by the outbreak of the Middle East conflict, has now risen to its highest level since January 2025”.

The bank said measures of costs and price growth were at or above their pre-conflict levels.

“Overall, the business survey shows that while most survey indicators have largely normalised since the beginning of the Middle East conflict there remains a soft underbelly to the survey’s data,” NAB said.

“Business conditions and confidence remain below their long-run averages, while forward orders have moved back into negative territory.

“Further, though it rose sharply in the month, capacity utilisation in trend terms remains notably below the level seen in early 2026.”

The fall in confidence was driven by weakness in finance, business and property, manufacturing and wholesale.

Confidence in July rose in all States except NSW and WA.