The sharp fall across National Australia Bank's November sentiment survey returns business confidence to below long-run averages, reflecting the ongoing fight against inflation and domestic and global economic uncertainty.
The Reserve Bank of Australia is widely expected to stay on hold at 4.35 per cent following the two-day December meeting concluding on Tuesday.
Mortgage holders aren't expected to be gifted any interest rate relief before Christmas. (Darren England/AAP PHOTOS)
After notching broad-based gains by industry in October, confidence has unwound.
In addition, NAB recorded a deterioration in the survey's measure of business conditions
Labour and purchase costs - important in the context of still-elevated inflation - were broadly unchanged, while retail prices softened.
NAB head of Australian economics Gareth Spence said the survey continued to paint a picture of ongoing soft growth in the December quarter to follow a weak national growth report for the three months prior.
Though Mr Spence highlighted still-strong capacity utilisation, signalling little slack in what companies are capable of producing and what they are actually churning out.
"With capacity utilisation unchanged at an above-average level it will likely take more time for price pressures to fully normalise," he said.
NAB, like ANZ and Westpac, expect the first interest rate cut to fall in May, a longer wait than the February start date pencilled in by Commonwealth Bank.
All 44 economists polled by Reuters last week believed the RBA would keep interest rates on hold on Tuesday.
The majority now expect the first cut in the June quarter, a departure from the November survey when the first three months of 2025 was the more popular pick.
The RBA has kept interest rates at an elevated 4.35 per cent in 2024 in a bid to keep inflation down (Dan Himbrechts/AAP PHOTOS)
Economists highlight strength in the labour market and the RBA's assertive posture on underlying price pressures as reasons to believe the wait for cuts will be a bit longer.
While the annual headline inflation rate is sitting at 2.8 per cent - back within the target band - the RBA's focus has been on underlying price measures, which have been slower to moderate.
Importantly, underlying measures reduce the effect of irregular or temporary price changes, such as petrol and government energy bill rebates.
Yet last week's national accounts showcased the slowest rate of annual growth in GDP in more than three decades, outside the pandemic, in a sign of an economy under stress.
Consumer confidence has further retreated after the weaker economic health report and Black Friday sales.
ANZ economist Madeline Dunk highlighted the sharp decline in respondents agreeing now was the right time to buy a major household item.
"That said, the subindex is still at its second strongest level since May 2022," she added.
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