A series of interest rate cuts in Australia extending well into next year may be needed to restore business confidence from its present recessionary levels, say economists.
A National Australia Bank business survey released on Tuesday shows business conditions are at their lowest level in seven years, while confidence remains at its lowest level since the 1991 recession.
The report follows hot on the heels of the Reserve Bank of Australia's decision to slash its economic growth forecasts in its quarterly policy statement on Monday in view of signs of a significant moderation in demand.
National Australia Bak chief economist Alan Oster said the report showed the economy was slowing faster than predicted. "It's an economy that has slowed very, very rapidly - it's not a very nice survey."
Financial markets are fully pricing in a quarter of a percentage point interest rate cut in September, and two further cuts by February.
TD Securities senior strategist Joshua Williamson says the economy is likely to need more rate cuts, extending into 2009. "We know that the weakness has been concentrated in the household sector, but the further deterioration in trading conditions, forward orders and employment strongly suggests that business investment and employment are in for a hit later this year."
Acting Prime Minister Julia Gillard says a number of "big global factors" are hitting the Australian economy.