Ructions on global financial markets last month have taken their toll on business sentiment in the National Bank's August survey.
A net 34 per cent of firms still expect the general business situation to improve over the year ahead, but that is down from a net 48 per optimistic amonth ago.
Their expectations for profits, exports, investment and hiring have all fallen as well.
"All remain at solid levels, though the uniformity of the declines clearly signals that we are proceeding with more caution," said the bank's chief economist, Cameron Bagrie.
A cautious tenor to the survey, especially among exporters - whose export expectations are the weakest for two years - was hardly surprising.
"The past month has seen more flip-flops in global markets than you would find at the beach in Bondi," Bagrie said.
"We have seen wild equity and currency market swings, a credit downgrade in the US, and sovereign debt concerns in Europe. And domestically, respondents appear to have cottoned on to the fact that interest rates will have to move up at some point, with a net 82 per cent expecting higher rates [up from 59 per cent a month ago]."
In the circumstances the level of confidence, while lower, was still encouraging. The bank's composite growth indicator, based on the survey's readings on firms' expectations of their own activity, profits, employment and investment, still pointed to an annual GDP growth rate of 4.5 per cent by early next year, Bagrie said.
The recovery from the global crisis was never going to be v-shaped.
"An economic super-cycle across Western nations that was driven by unsustainable growth in indebtedness has inevitably been replaced by an equivalent period of gradual debt repayment. Welcome to the hard slog."
Expectations of inflation a year ahead jumped to 3.5 per cent from 3.2 per cent but firms expecting to raise their own prices over the next three months has fallen to a net 21 per cent.
