The latest September quarter 2011 Survey released on Thursday showed a further weakening in general Australian business conditions, with business confidence for the next six months also dropped.
The Westpac-Australian Chamber of Commerce and Industry (ACCI) survey of industrial trends, conducted between August 2 and September 9, found its composite index fell 1.2 points in the September quarter to 47.7 points. The index remains below the crucial 50-point mark, which separates economic expansion from contraction, for the second successive quarter.
The quarterly expected composite index also fell from 53.1 in June to 49.8 in September. Over the last six months it has fallen by a stunning 15.3 points.
Profit expectations for the next 12 months have also declined to their lowest level for more than two years, with manufacturers facing rising costs but unable to recover cost increases by raising prices.
According to ACCI's Director of Economics and Industry Policy, Greg Evans, the result is well short of earlier predictions and it is clearly disappointing.
"The basic message from this survey is that overall business conditions are deteriorating for Australian manufacturers," he said in a statement released on Thursday. "Activity indicators and growth expectations are more subdued than three months ago and concerns over escalating political and economic uncertainties and rising global concerns have continued to dampen demand and investment plans."
Meanwhile, Westpac chief economist Bill Evans said the survey sent a very clear message that the central bank will not lift interest rate within this year.
"It is time for the authorities to ease financial conditions," Evans said in a email note. "Inflation pressures are weak, labour markets are soft, and investment and export plans have softened."
Reserve Bank has last raise interest rate for 0.25 percent to 4. 75 percent in November last year.
ACCI is the largest and most representative business association in Australia, having over 350,000 business members.