Business Confidence falls and markets are weighing a rate hike in November

uesday brought the NAB business survey and the minutes of the RBA’s September meeting, both of which shed light on how the economy and the Bank are faring after the latest increase. Here is the wrap.

Key Takeaways

• Business confidence fell again. NAB’s September survey showed confidence dropping to -13, a third straight monthly fall and near historic lows, with the employment index at a five-year low.

• The RBA minutes stayed hawkish. The record of the September meeting showed a unanimous hike to 4.60%, concern that demand and inflation risks are greater than previously thought, and a clear willingness to raise rates again if needed.

• Rates are biting, but markets are holding up. Bond yields remain near multi-year highs and yet share markets have stayed resilient.

• A busy week offshore. The start of US earnings season and Australia’s September jobs report are both due later in the week.

Business Confidence Slides to -13 in September

Tuesday’s NAB business survey confirmed the gloom. Business confidence fell another four points to -13 in September, its third straight monthly decline, now well below its long-run average and among the weakest readings in the survey’s history.

Hiring Pulls Back as the Employment Index Hits a Five-Year Low

Business conditions held steady at -1, but the detail was soft: the employment index dropped to its lowest in five years, a sign firms are starting to pull back on hiring. NAB pointed to higher interest rates and the recent surge in oil and fuel prices as the main culprits. Tellingly, cost pressures stayed elevated even as sentiment sank. In short, businesses are feeling the squeeze, and their caution could weigh on hiring and investment in the months ahead.

A November hike is about a one-in-three chance

Also on Tuesday, the Reserve Bank released the minutes of its September meeting, the one at which it lifted the cash rate to 4.60%, its fourth increase this year. All board members agreed the quarter-point rise was necessary. They judged that excess demand in the economy was greater than it had previously assumed, and saw an increased risk that inflation stays elevated, pointing to pressures from capacity constraints, the Middle East conflict and the AI boom. They did briefly weigh the case for holding — noting the fall in house prices — but concluded a hike was warranted, and reiterated they would raise rates further if needed. The message reinforces what markets already suspected: another increase in November remains firmly on the table. Markets are pricing in roughly a one-in-three chance of another rate hike in November.

Rates Bite at Home, but Share Markets Hold Firm

The broader picture is little changed from recent weeks. Higher rates are clearly being felt with house prices having now fallen for six straight months and consumer confidence has slumped to lows, while government bond yields remain near multi-year highs, with Australia’s 10-year around 5.3%. Yet share markets have stayed resilient: the ASX and Wall Street are both near recent highs, a notable divergence from the caution in bonds and among households. For now, equity investors are looking past the higher-rate backdrop towards positive earnings expectations, though it remains a tension worth watching.

Looking Ahead

The second half of the week is busier, and mostly offshore. The start of the US third-quarter earnings season will set the global tone, while at home the September jobs report on Thursday is the main event — a key gauge of whether the labour market is softening, as the RBA wants, ahead of its November decision.

Key Dates to Watch

• Australian jobs (September) — Thursday: The main local release, watched for signs the labour market is cooling ahead of the RBA’s November meeting.

• US earnings season — under way: Third-quarter results begin, led by the big banks.

• Oil & the Middle East — ongoing: Still feeding into fuel prices and the inflation outlook.