Australian mortgage brokers are facing a more nuanced landscape as 2026 begins, with business momentum softening while inflation and employment send mixed signals on the rate outlook.
Westpac economist Luka Belobrajdic (pictured left) says business conditions “started the year on a weaker footing, pointing to a loss of momentum at the turn of the year.”
The NAB business conditions index slipped from +9 to +7 in January, back at its long‑run average, while confidence nudged up to +3. For brokers, that points to an economy operating around trend rather than clearly accelerating or stalling.
Under the hood, demand looks softer and margins are being squeezed. Trading conditions saw the sharpest fall, dropping six points to +10, while profitability eased as firms absorb weaker demand rather than pass on higher costs. That mix can weigh on small businesses and self‑employed borrowers, a key segment for many broker clients.
The labour story is more supportive for housing. The employment index held at +5 for a third month, still above average and consistent with ongoing labour market resilience.
CreditorWatch chief economist Ivan Colhoun (pictured right) describes business conditions as “consistent with an economy broadly growing around trend,” underscoring that labour demand is holding up even as conditions cool.
Crucially for RBA, capacity utilisation has now eased for a second month, dipping to 82.9%. That loosening undermines the case that inflation is being driven purely by an overheated economy, even if utilisation is still historically high.
Belobrajdic also argues RBA’s assessment of supply‑side constraints “may be overly pessimistic,” a view that, if borne out, could limit how far rates need to rise.
On prices, the NAB survey brings some welcome news.
Colhoun notes that “perhaps the most pleasing aspects of the survey were the unchanged +5 reading for employment intentions and the fall in the retail prices reading to the lowest rate since the pandemic.”
But input costs remain elevated, and Colhoun still sees “more noise than signal” in some of the state and industry detail, warning that inflation is unlikely to return to target without at least one more rate increase. He expects that hike in May.
For brokers, the message is to prepare clients for at least one more move from RBA while positioning them for an environment where inflation pressures are easing and the jobs market is still doing some heavy lifting for borrowers.
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