In the bank’s quarterly business survey, NAB said the dip in business confidence was consistent with its monthly survey, which found a noticeable “pull back” in confidence during November.
“The pull back in confidence was not surprising given the more subdued near-term outlook for the economy,” a report from NAB said.
“Large declines in commodity prices are weighing on incomes and could further erode already soft business and consumer confidence.”
However the bank pointed out there may be some “reprieve” as the value of the Australian dollar depreciates and oil prices continue to drop.
“[This will] shore up disposable incomes and reduce inflationary pressures – freeing up the RBA to bolster the economy via an additional rate cut.
“Lower rates should drive stronger dwelling investment and consumption, although still elevated household savings rates and debt ratios are a concern,” the report said.
NAB also found that business conditions were broadly unchanged in the December quarter, although it pointed out that its monthly survey suggests the business environment deteriorated over the course of the quarter.
“This outcome for the quarter (+4) is a little above the long run average of +1 index point, suggesting that domestic demand growth in [the fourth quarter] may have been closer to trend,” the report said.
“By component, trading and employment were unchanged (the latter at low levels), while profitability improved marginally.
“However, the business survey continues to show a patchwork economy, with much of the strength restricted to a narrow subset of industries – construction and service sectors were the only industries to record positive business conditions,” the report said.
