Australian Economic Comment "Stagflation-lite ahead: Business conditions..."

Research evidence excerpt

Australian Economic Comment "Stagflation-lite ahead: Business conditions..."

Global Research

12 May 2026ab

Australian Economic Comment Economics

AustraliaStagflation-lite ahead: Business conditions

weakening, while wages & inflation rise further Stephen Wu

Economist

stephen.wu@ubs.com

+61-2-9324 2283

George Tharenou

Business conditions dropped further to +2.6, nearly a ½ standard deviation Economist

below long-run average. Meanwhile, confidence recovered somewhat, but george.tharenou@ubs.com

still is near the worst since COVID in 2020. +61-2-9324 3520

But selling and purchase price pressures continued to intensify, nearing levels Stephanie La

reached during the pandemic. Associate Economist

stephanie.la@ubs.com

RBA faces a policy dilemma: inflation was too high and has spiked further, but +61-2-9324 2655

conditions are weakening. Izzy Lowe

Associate Economist

Business conditions drop further; & confidence remains at pandemic levels izzy.lowe@ubs.com

Business conditions (NAB monthly business survey) in Apr-26 fell to +2.6 (after +5.5). +61-2-9324 2651

That is still a relatively resilient outcome, considering the global oil shock and the surge

in purchase costs. But further weakening is likely ahead, given the ongoing fall in

forward orders. Business conditions are -0.4 standard deviations below its long-term

average (of +6.6 since 1997); & if sustained implies real GDP slowing to below 2% y/y.

Meanwhile, business confidence recovered modestly, but at -24.4 (after -29) still remains

near the worst since COVID in 2020.

Selling/purchase prices rocket to 7.1%/18%; & approaching pandemic peaks

Selling prices surged further, to 7.1% annualised (after 4.4%; & 2.8% prior to the

Middle East conflict); & the highest since Aug-23. The pandemic peak was 10.1% in

Mar-22.