KEY POINTS:
Business confidence has hit the skids with firms taking a darker view of their prospects than at any time in the past two years.
The National Bank survey found 54 per cent of firms expected business conditions to get worse over the next 12 months while only 10
per cent expected them to improve.
The net 44 per cent pessimistic compares with a net 25 per cent in the previous survey in December.
Their view of their own outlook, a more reliable indicator, has also dropped sharply with only a net 2 per cent expecting activity to increase, the weakest reading for two years.
If it stayed at those levels it would be indicative of economic momentum stalling outright, the bank's chief economist Cameron Bagrie said.
"Brace for leaner times ahead."
He attributes the fall in confidence to falling sharemarkets, a weak housing market and a dollar that is squeezing the life out of the export sector.
The rising cost of necessities like food and petrol was eroding discretionary income and the retailing sector had been flat for nine months.
But some of the negativity in the survey might just reflect uncertainty, Bagrie said.
And some comfort might be taken from the fact that unemployment had fallen to an historically low 3.4 per cent and the Australian economy is booming - although the lure of the latter explains a lot of the former.
A net 20 per cent of firms expect profitability to decline and a net 2 per cent more firms expect to cut than increase staff numbers.
The decline in hiring intentions was led by the construction and retail sectors. "They led the employment charge over the past few years but are now at the forefront of slowing economic momentum." Export intentions are also weaker but investment intentions remain positive.
The proportion of firms intending to raise their prices fell slightly, from a net 29 to 28 per cent, but remains high by historical standards, and inflation expectations have crept higher.
Bagrie said that after a prolonged economic expansion, a period of consolidation was both inevitable and necessary. "It's the pace of the deceleration that worries us. It's slowing markedly."
When that became clear in the hard economic data he expected the dollar to fall.