Australian Business Activity Surges in June Amid Cooling Inflation, Rate Cuts

Australian business activity rebounded strongly in June, driven by rising sales and profitability as easing inflation and lower interest rates began to support demand. According to National Australia Bank’s (NAB) monthly survey, business conditions jumped to +9 from zero in May, surpassing the long-term average of +6. Business confidence also rose for the third straight month, climbing 3 points to +5.

NAB’s chief economist Sally Auld noted that while monthly fluctuations should be interpreted cautiously, the trend improvement is a positive sign following a sluggish start to 2025. She added that improving sentiment was encouraging given the backdrop of negative global headlines in recent months.

Key components of the survey reflected broad-based improvement. Business sales surged 10 points to +15, profitability increased 9 points to +4, and employment edged up 2 points to +3. Notably, the manufacturing and retail sectors recorded the strongest recoveries after significant declines in May.

Retail gains are particularly notable, as consumer demand had remained weak despite two interest rate cuts and slowing inflation. The Reserve Bank of Australia (RBA) is expected to cut rates again, likely by 25 basis points to 3.60%, with markets anticipating further easing toward 3.10% or below. This outlook is underpinned by core inflation falling into the RBA’s 2–3% target range.

NAB’s data also showed retail price growth slowing to 0.6% in the June quarter, the lowest since early 2023, while purchase costs remained elevated at 1.5%, suggesting ongoing margin pressures.

The June rebound offers hope that Australia’s economy is beginning to respond to monetary easing and disinflation, potentially setting the stage for a more stable second half of 2025.