Business confidence took a tumble in the NAB May 2024 conditions survey, to be -3 index points and back into negative territory. Business conditions also fell to be just below the long run average. Businesses surveyed reported falling trading and profitability conditions, but a slight rise in employment and labour, input and product pricing. The overall results could reflect the prevailing sentiment that inflation will be around for longer than initially hoped, and as a result interest rates will stay higher for longer.

Notably, confidence fell sharply in construction (as well as manufacturing and transport & utilities) suggesting the tough operating conditions in the construction sector will abound for some time. The construction sector has a rolling annual business failure rate of 5.0 per cent and is the industry with the highest number of payment arrears, with 10.3 per cent of all invoices more than 60 days overdue.

The construction sector also accounts for 23.8 per cent of all registered ATO tax debts above $100,000, suggesting that there are many businesses in this sector with cash flow problems. It is unlikely that confidence will begin to improve in the construction sector until cost pressures ease and the first cash rate cut is in closer view.