After a long stint of above-average business conditions throughout the pandemic recovery, the slowing economy has caught up with Australian companies.
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Employment, trading and profitability - the three indicators of business conditions tracked by National Australia Bank in its monthly survey - all fell back to their long-run averages in April.
They underline Treasurer Jim Chalmers' message that the economy is facing headwinds both at home and abroad as he fine tunes spending plans over the coming year in his third budget on Tuesday.
NAB chief economist at the bank, Alan Oster, said this "marks a bit of a milestone" after a long and gradual moderation in conditions from exceptionally high levels in 2022, spurred on by the pandemic recovery.
Overall, business conditions fell two points to seven index points, which is broadly around the long-run average.
Interest rate-sensitive sectors were in a particularly tough spot, with retailers clearly under pressure as financial strain forced consumers to pull back on spending.
Yet services sectors, such as finance, transport and recreation, and personal services were still faring pretty well.
"Basically, (the index) is just saying that, you know, the economy is still slowing but it's okay," Mr Oster said.
Business confidence levels remained unchanged, based on the survey, albeit at below-average levels.
The survey also picked up promising signs of easing cost pressures for businesses, in a win for the inflation outlook.
Fresh forecasts from Treasury show inflation back within the two-to-three per cent target range by Christmas, well ahead of the Reserve Bank's own predictions to have consumer prices contained by the end of 2025.
Finance Minister Katy Gallagher said timing explained the discrepancies, with the RBA's forecasts prepared ahead of Tuesday's federal budget - which is expected to contain measures to tackle price pressures.
Australian Associated Press
