What is the 'NAB Business Confidence Index'

The NAB Business Confidence Index is a key measure of business confidence in Australia, published monthly and quarterly by National Australia Bank (NAB). It is a component of the bank's business survey, which covers hundreds of Australian companies to assess business conditions in the country. The index is closely watched to gauge the overall condition of the Australian economy. It has been published since 1997.

BREAKING DOWN 'NAB Business Confidence Index'

The NAB Business Confidence Index is calculated on a net balance basis. This means that surveyed companies are asked whether there is a positive or negative outlook — the specific question is "Excluding normal seasonal changes, how do you expect business conditions facing your industry to change in the next three months?" — and the result calculated as positive less negative responses, which is the net balance. Thus, a balance above zero reflects improving business confidence and below zero, falling confidence. It can be seen from the question that the responses are forward-looking, albeit short term. A positive outcome can, therefore, be regarded as positive for the near-term economic outlook. This, in turn, may benefit growth-sensitive instruments, such as the Australian dollar.

The average in the index since 1997 has been just over +6. It reached a high of +21 in April 2002 and recorded a low of -30 in October 2008, in the wake of the global financial crisis.

The confidence index is published with quite some detail behind the headline number. In the data releases, NAB provides information as to both industry and regional confidence. For example, in April 2018, NAB noted that mining and construction showed the most positive business confidence trends while finance, property and business were least positive. Geographically, Tasmania and Western Australia were the states that showed the highest business confidence, and Victoria the lowest (although still a positive balance). NAB also tries to determine what factors are driving business confidence, and questions business on these with the results published in the quarterly survey. NAB noted for example in the March 2018 quarterly survey that margins, wage costs and government policies and regulations had the largest impact on confidence at that stage.

RELATED TERMS
  1. Reserve Bank of Australia

    The Reserve Bank of Australia is Australia's central bank, involved ...
  2. National Bank

    In the United States a national bank is a commercial bank, while ...
  3. Westpac Consumer Confidence Index

    An index measuring the level of consumer confidence in Australia. ...
  4. Consumer Confidence Index - CCI

    The Consumer Confidence Index (CCIA) Survey by the Conference ...
  5. AUD/USD (Australian Dollar/U.S. ...

    The AUD/USD is the abbreviation for the currency cross of Australia ...
  6. Present Situation Index

    The Present Situation Index measures overall consumer sentiment ...
Related Articles
  1. Trading

    The Australian Dollar: What Every Forex Trader Needs To Know

    With its unique relationship to the Japanese yen, the AUD is an important currency for FX traders.
  2. Retirement

    Retire in Australia with $200,000 of Savings?

    Maybe. Thanks to a strong U.S. dollar, Australia has become more affordable, at least for Americans.
  3. Investing

    3 Best High-Yielding Australia Bond ETFs (AUNZ, BOND.AX)

    Discover detailed analyses of the top three high-yielding Australian bond ETFs, and learn about their yields, duration and characteristics.
  4. Investing

    The 3 Largest US-traded Australia ETFs

    Australia’s appeal as an investment destination for prospective investors is incessant. ETFs are undoubtedly an interesting investment option to consider.
  5. Insights

    Understanding the Consumer Confidence Index

    Consumer confidence index is an important economic indicator for investors. Find out what it means and how it's calculated.
  6. Investing

    Charles Schwab Launches Australian Operations

    Charles Schwab has re-established a presence in Australia to help Aussies invest in U.S. stocks.
  7. Investing

    Will Australia Do Away With Its $100 Bill?

    UBS analysts suggest that Australia should get rid of its highest denomination bill.
  8. Insights

    Consumer Confidence Index

    The Consumer Confidence Index is the result of a monthly survey of 5,000 U.S. households by the Conference Board that measures how optimistic or pessimistic consumers are about the economy's ...
RELATED FAQS
  1. Consumer Confidence Vs. Consumer Sentiment

    Is there any real difference between consumer confidence and consumer sentiment? Read Answer >>
  2. Is it possible to invest in an index?

    While you cannot buy indexes, which are just benchmarks, there are three ways for you to mirror their performance. Read Answer >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center