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Good News For RBA As Cost Growth Down Again


The September NAB business survey showed resilience in current business conditions but indicated some darker clouds ahead with confidence down. It suggested that growth in costs may have peaked. This data is likely to affirm the RBA’s slower pace.

  • Good news for the RBA is that both the labour and purchasing cost components moderated for the second consecutive month, tentatively implying that they may have peaked, but remain elevated. Wage cost growth moderated to 3.1% from 3.4%, suggesting that wage-setting psychology hasn’t shifted with higher inflation outcomes.
  • Final product price growth fell to 2.1% from 2.5% while retail prices dropped to 2.2% from 3.3% in September. The Q3 averages though continue to point to a pick-up in Q3 CPI, released October 26, (see chart).
  • Business conditions not only rose to 25 in September, the highest since June 2021, but August was also revised up 2 points to 22. The strength was broad based across industries and states. They were driven by very encouraging trading conditions (+9 points) but profitability and employment also remained supportive, suggesting that robust hiring is likely to continue for now.
  • Business confidence fell 5 points to 5, its lowest level since June, but around its long-run average. The Q3 average implies that growth should remain solid going into year end. Further declines would suggest that the economy may be slowing.
  • See NAB press release.
Finished goods prices vs CPI y/y%

Source: MNI - Market News, Refinitiv, NAB

Business conditions vs confidence

Source: MNI - Market News, Refinitiv, NAB

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