CANBERRA, 13 October 2026—There is no doubt that the increase in fuel prices, borrowing costs and uncertainty regarding the global economy has affected Australian businesses, making them more cautious in their investments. As a result, less optimistic about the future, firms will be laying off workers and becoming more cautious in their decisions.
According to the information released on 13 October 2026 by the National Australia Bank (NAB), most Australian businesses in September had lower optimism about the state of the economy. There is little doubt that further decrease of business confidence will keep dampening economic activity despite the number of firms that continue functioning adequately in the current high-capacity utilisation situation.
Business confidence reaches a historic low
According to the Business Confidence Index, which reached −13 points in September, the NAB recorded another significant decline in business confidence for the third month in a row. Confidence is now considerably below the long-term average of +5 as well as the results of the survey held last year.
The most memorable thing about this report is that this result is one of the weakest in the report’s history, as it is in the lowest 5% of the recorded results. NAB states that confidence is at such a level that hardly any similar instances can be observed apart from the Global Financial Crisis and COVID-19 period.
The survey was conducted from 23rd to 30th September 2026 in times of ongoing global uncertainty, huge fuel prices, and some impact of the latest cash rate increase made by the Reserve Bank of Australia. On the mentioned date, the RBA increased the cash rate by 25 basis points, thus raising the costs of borrowing for local companies.
As clarified by Gareth Spence, who serves as NAB Head of Australian Economics, companies face the need to deal with domestic inflation and interest-rate doubts while experiencing international problems and high fuel expenses.
The issue of fuel prices stretches beyond the gas pump
Rising petrol costs do not only represent an additional burden on consumers. They can affect freight prices, distribution expenses, and raw material transportation costs, putting further strain on businesses in the geographically diverse economy of Australia.
For firms struggling with high financing costs, the necessity of absorbing increases on this front diminishes profitability, while passing expenses onto customers may reduce demand in the period when households are already under pressure of the cost of living.
The report’s figures illustrate this predicament. According to Westpac’s analysis of the September data, the quarterly cost of purchases has risen to 2.4%, while the increase in price of the finished product remained at 0.8%. The figures suggest that businesses absorb a considerable portion of the increased cost of inputs instead of passing those costs on to consumers.
The results may go further than just affecting corporate profits if ongoing cost pressures lead to rising consumer prices.
Hiring signals take on a troubling tone
The overall business conditions index did not change in September, remaining at minus one, although the employment index decreased by three points to minus one, which is the lowest level in five years.
The employment figure is especially important because companies tend to review recruitment strategies as their sales and profit outlooks become less certain. If this trend continues, the reduced level of hiring might become one more way to reflect business pessimism on the economy as a whole.
Nevertheless, the situation is not entirely grim, as capacity usage has reached 82.3%. This is nearly 1% above the average for the past several years. Moreover, the index is higher than average for five out of the eight industries analysed, indicating that demand and production pressures are still present to a certain degree.
Differences among the regions testify to the uneven nature of business in Australia
Regional statistics illustrate how different businesses operate in Australia. According to NAB, the business environment index in Western Australia is 16, whereas in Queensland it equals -1, in New South Wales -0, and in Victoria.
Such differences suggest that national indicators of confidence can hide significant discrepancies between industries and regions.
NAB notes in its report that the combination of low confidence, high costs, low profitability, and a low base of employment suggests that Q4 2026 will continue to see drops in economic activity.
The next NAB monthly business survey is due on the 10th of November 2026. The results should indicate whether August turned out to be another step in terms of slowing down or whether the companies have started regaining their confidence.
Currently, Australia is in a precarious position, needing to control inflationary pressure without further harming business activity. The upcoming months will reveal how long businesses can manage rising costs before they reveal their true nature by cutting back on investments, slowing down hiring, and hindering economic growth.
