NAB’s latest Regional & Agribusiness Horizons Report found food and beverage manufacturing recorded the largest industry growth in lending, surging 11.9 per cent in the last year. While 2024 saw a four per cent increase in demand for credit, NAB says food and beverage’s jump was the “ripple effect” of a strong Agri sector performance.
The report combines data from the bank’s regional bankers and industry specialists, and consumer surveys to look at the economic conditions, property trends, and investment opportunities shaping regional and rural Australia.
NAB executive for Regional and Agribusiness, Khan Horne, said cash flow persists as a major issue for businesses, with rating costs and margins top issues for customers.
"Businesses appear to be maximising existing resources to meet consumer demand rather than spending cash on hiring more labour or investing in more assets due to cash flow constraints,” Horne said.
But overall, Horne said there were signs of “cautious optimism”.
“The report showcased the considerable resilience and optimism of regional Australian businesses as they strived to tackle a myriad of ongoing challenges.
“Even with some economic uncertainty this year, we’re confident our regional and rural businesses are in a strong position to deal with – and withstand – the potential headwinds,” Horne said.
The report points out that with a strong performing agricultural sector (ABARES is predicting $91 billion in turnover for the 2025-26 financial year, with more than $40 billion coming from the livestock sector), regions need more value-adding industries including business services, logistics, retail and wholesaling.
It found there was strong growth in the road transport industry, which reflected increased connectivity in the regions and a continued infrastructure boom.
Rising investments in wholesaling businesses show the shift towards the establishment of cost-efficient operations in regional areas, while growth in the business services sector indicates a preference for accessing services locally, it found.
Most states maintained solid growth in borrowing for investment. This included Western Australia and Queensland, which posted particularly strong results in agriculture and mining, driving prosperity for other regional businesses.
Still weighing on many businesses are labour resourcing and wage costs, costs of inputs, and margins.
Customers have been telling NAB bankers that costs and margins are their top concerns. From its 2021 net balance peak of around 40 points, cash flow sat below 20 points (the long-run average) for much of 2024.
Businesses’ capacity utilisation – how they are managing resources, such as equipment, labour or facilities – is above the long-run average, so rather than spending cash on hiring more labour or investing in more assets, they appear to be maximising existing resources to meet consumer demand.
“Those on the land, in country towns and in regional hubs are experts at dealing with the unexpected. While Australian agriculture continues to thrive and many locations have experienced bumper harvests and near perfect conditions, we know there are some in other areas or sectors facing a range of specific challenges such as commodity price fluctuations, tough trading conditions and unfavourable weather,” Horne said.
Ultimately, regional businesses have demonstrated strength, growing by 8.7 per cent (beating 8.5 per cent in 2023). But it was the agricultural sector that saw the big turnaround, improving to 5.1 per cent growth off the back of 2023’s 3.3 per cent decline.
“Our businesses are in good condition, there are signs of cautious optimism and, most importantly, we have the skills, experience, character and financial firepower to overcome any hurdles that spring up,” Horne said.
