Signs of stability in Aust as firms tough it out

SYDNEY - Australian business conditions continued to falter in March although at a slower pace than in February, a survey shows.

The National Australia Bank (NAB) monthly business survey's measure of business conditions rose three index points to minus 17 points, a level last seen in June 1992.

The measure of business confidence rose nine index points in March, to minus 13 points. A reading below zero indicates pessimists outweigh optimists.

While measures of trading conditions, profits, forward orders and capital spending improved, they remained negative with employment and stocks levels in the survey.

NAB chief economist Alan Oster said businesses continued to struggle in a tough environment.

"At best, the pace of decline in business conditions in March may be stabilising but at levels that imply further negative growth and are still the worst seen since 1992," Oster said.

"Every sector in trend terms is still reporting significant further deterioration in activity levels."

Business confidence improved for the second month in a row, Oster said.

"Indeed, the sectors which had led recent declines have in March led the improvement, notably mining, manufacturing and finance and business services," he said.

"Retail confidence also continues to benefit from prospective government cash handouts.

"The extremes in recent confidence collapses have been at least partially reversed and confidence now appears more related to the type of business outcomes that have been recently experienced [and/or are in prospect]."

Oster said the really concerning aspect of the survey was the rapid fall in employment - down to a level last seen in September 1991.

The bank has elevated its forecast for Australia's unemployment rate and predicts it to be 6.75 per cent by the end of 2009 and 7.75 per cent in 2010.

"The message from the survey is that a significant deterioration in employment is under way and will continue to show in the official numbers - with dire consequences for unemployment," Oster said.

The rate of unemployment rose 0.5 percentage points to 5.7 per cent in March, the highest jobless rate since February 2004, the Australian Bureau of Statistics said last week.

The bank forecasts for the national economy remained unchanged with gross domestic product expected to shrink by 1 per cent in 2009 and grow by 0.75 per cent in 2010.

"It needs to be stressed that we see no fast recovery in Australian activity," Oster said.

Oster expects the Reserve Bank of Australia to cut the cash rate from 3 per cent to 2 per cent by the end of this year.

- AAP