Weak business conditions continue: ACCI

Continuing weak trading conditions across mainstream businesses justify another interest rate cut by the central bank, the Australian Chamber of Commerce and Industry (ACCI) says.

Its latest business expectations survey released on Monday showed conditions flatlined in the first three months of this year at weak levels.

The business conditions index was 42.1 points in the March quarter, compared to the previous three months, and still below the crucial 50-point mark separating contraction and growth.

"Overall, the survey shows a continuation of relatively weak trading conditions across the mainstream economy," ACCI chief economist Greg Evans told reporters in Canberra.

"It also shows that there is little evidence to date of broad-based growth that was the expectation of the (federal) government and the Reserve Bank."

Among the survey's components, selling prices fell to an 18-year low and profitability dropped to a two-year low.

There was also a deterioration in sales revenue and employment was flat, although there was a small uptick in investment.

"We believe there is justification for further rate cuts," Mr Evans said.

"That may well be tomorrow, but is probably more likely in June and towards later in the year."

The Reserve Bank of Australia (RBA) will hold its monthly board meeting on Tuesday, although most economists expect it will sit pat on a three per cent cash rate for now.

However, Mr Evans said there was only so much monetary policy could do to turn around business confidence and that the retail banks could do more.

"We saw very strong profitability figures from the commercial banks last week, and we believe the banks have the some opportunity for out of cycle rate cuts to be delivered, not only to households borrowers, but also the business sector," he said.

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