The December round of business confidence surveys from both Australia and New Zealand reveal corporate sentiment remains subdued despite some marginal improvement from the depths reached mid-year.

The NAB Monthly Business Survey for Australia shows the business confidence index at +2 in December, up from -1 in November but still well below the long-term average of +6. This improvement is statistically modest but psychologically significant—it represents the first sustained move above zero after several months in negative territory.

Business conditions, which measure actual trading performance rather than sentiment about the future, came in at +8, unchanged from November. This sits slightly above the long-term average of +7, creating an interesting disconnect with the confidence measure. Businesses are reporting that current conditions are okay, but they’re not optimistic about the future. This pattern typically indicates uncertainty rather than outright pessimism.

Breaking down the business conditions index by component, trading conditions registered +9, profitability came in at +6, and employment at +9. The profitability measure is the weakest component, reflecting margin pressures that businesses continue experiencing. Companies can maintain sales volumes but they’re finding it harder to maintain pricing power as consumer price sensitivity increases.

New Zealand’s ANZ Business Outlook Survey shows a similar pattern of modest improvement without genuine optimism. The headline business confidence measure reached -12 in December, up from -18 in November. While the trajectory is improving, negative double-digit readings indicate businesses remain pessimistic about the general economic outlook.

The own-activity outlook measure, which asks firms about their specific business rather than the overall economy, sits at +7 in New Zealand. This is notably more positive than the general outlook, suggesting businesses distinguish between their own prospects and the broader economy. It’s a pattern that often emerges during periods of economic transition.

Looking at sector-specific confidence in Australia, manufacturing improved to +5 from +2, while retail deteriorated to -3 from 0. The retail weakness aligns with the soft December trading data we’ve seen. Wholesale confidence remained steady at +4, and construction ticked up to +1 from -2.

Professional services confidence in Australia sits at +6, which is actually above the historical average for this sector. This suggests the shift toward services-based economic activity is creating reasonable conditions for consulting, legal, accounting and similar businesses, even as goods-producing sectors struggle.

New Zealand’s sector breakdown shows construction particularly weak at -25, reflecting the well-documented challenges in that industry. Retail sits at -15, manufacturing at -8, and services at -5. The universally negative readings across sectors underscore the breadth of the confidence weakness.

Employment intentions provide a useful leading indicator for labour market conditions. In Australia, the employment index sits at +9, suggesting businesses still plan to hire modestly. However, this is down from +12 six months ago, indicating the pace of hiring intentions has slowed. New Zealand’s employment intentions register at -2, pointing to slightly negative hiring plans for the months ahead.

Capacity utilisation reported in the Australian survey sits at 81.4%, which is actually above average. This seems inconsistent with subdued confidence until you consider the composition—businesses are running existing operations reasonably hard but not investing in expanding capacity. They’re sweating existing assets rather than building new productive capacity.

Capital expenditure intentions tell this story clearly. In Australia, capex intentions registered -3, negative for the first time since mid-2023. Businesses are planning to reduce investment spending, not dramatically, but enough to matter for overall economic growth. New Zealand capex intentions sit at -15, indicating even more pronounced investment caution.

Pricing intentions have moderated significantly in both countries. Australian firms expecting to raise prices outnumber those expecting cuts by just 6 percentage points, down from 25 percentage points a year ago. This suggests inflation pressures are genuinely easing as businesses find it harder to push through price increases.

Input cost growth reported by businesses has also moderated. Australian firms report input costs growing at 1.8% quarterly, down from 2.5% six months earlier. Labour costs continue growing faster than other inputs at 2.2% quarterly, but even this has slowed from earlier in the year.

The forward orders component of the surveys provides insight into near-term trading conditions. Australian forward orders sit at +6, which is roughly neutral—not pointing to imminent strength or weakness. New Zealand forward orders register at -5, suggesting slightly softer conditions ahead.

Credit conditions reported by businesses have eased marginally. Australian firms reporting that credit is harder to obtain outnumber those saying it’s easier by 8 percentage points, down from 15 percentage points six months ago. This suggests banks are becoming slightly more accommodative, though they certainly haven’t opened the lending taps.

Interestingly, businesses in both countries report that demand is a bigger constraint than access to labour or other inputs. This represents a significant shift from 2021-2023, when supply-side constraints dominated. The economic challenge has rotated from “we can’t produce enough to meet demand” to “we can’t generate enough demand for our existing capacity.”

The regional breakdown in Australia shows Queensland and Western Australia with notably stronger confidence than New South Wales and Victoria. The resource state advantage continues to show up in business sentiment, though even in Queensland confidence sits only modestly above historical averages.

Looking at firm size, larger businesses (those with more than 200 employees) report confidence of +5, while smaller businesses (fewer than 20 employees) sit at 0. This size gradient has been consistent throughout 2025, with larger firms generally weathering the subdued conditions better than smaller operators.

What the December surveys suggest overall is that businesses are neither panicking nor celebrating as we head into 2026. They’re cautious, somewhat pessimistic about the broader economy, but still operating and planning for continuation of current conditions rather than major deterioration. It’s not a formula for strong growth, but neither does it point to imminent recession.