RBA May Hike Again as Business and Consumer Strain Grows

A new business and consumer survey suggests that Australian businesses and households are under increasing strain, supporting the case for another interest rate hike by the Reserve Bank of Australia (RBA), followed by an extended pause.

The latest NAB Business Survey showed business conditions fell five points to -1 in August, with construction, manufacturing, retail trade, and recreation and personal services recording the largest falls. Fuel costs played a significant role in the decline, particularly among sectors exposed to higher interest rates and fuel prices.

Profitability also dropped sharply in August, with businesses still reporting elevated purchase and labour costs alongside retail price growth. Capacity utilisation eased overall and has been broadly flat over the past year, though it remains relatively elevated.

Separate figures from Westpac showed consumer sentiment fell 5.2% in September, reversing most of the 6% rise recorded in August. Confidence remained well below year-earlier levels, with household finances a key source of concern.