The National Australia Bank (NAB) monthly business survey’s measure of business conditions fell nine index points to minus 20 points, a level last seen in June 1992,
The measure of business confidence rose 10 index points in February, to minus 22 points.
But the lift in business confidence followed the worst reading of confidence in the survey’s 20 year history in January.
A reading below zero indicates pessimists outweigh optimists.
The February survey’s measure of forward orders, trading conditions, export sales, profits, capital spending and employment all stayed negative.
NAB chief economist Alan Oster said areas expected to be recipients of the federal government’s second stimulus package provided the improvement in confidence.
On February 3, the federal government said workers earning under $100,000 would receive a cash handout as part of their second stimulus package worth $42 billion to boost domestic spending.
This followed the government’s first stimulus package where pensioners, families and carers received one-off payments, in total $8.7 billion, during December.
“While business confidence improved in February, that is very much driven from improved expectations in the retail and wholesale sectors,” Mr Oster said.
“In turn, those sectors are the ones most likely to benefit from the next round of government cash handouts.”
Mr Oster said the economy was unlikely to recover in the near-term.
“There is little in the survey to suggest that activity levels might be bottoming with continuing falls in mining and manufacturing activity very prominent,” he said.
“Nor is there much solace to be found in the employment, forward order and capex data in the survey.”
The bank has lifted it forecast for the nation’s jobless and now sees it at 6.5 per cent by the end of 2009 and 7.5 per cent in 2010.
The NAB survey showed the employment index fell by 10 index points to minus 27 points in February, the largest fall in the survey’s history to level last touched in December 1991.
The employment reading indicated more shedding of workers and it was worse than the Australian Bureau of Statistics (ABS) labour market reports, Mr Oster said.
The ABS will release the labour force statistics on Thursday, with market forecasts of a loss of 20,000 jobs in February and the unemployment rate to rise 0.2 percentage points to five per cent.
Following the 0.5 per cent contraction in Australia’s gross domestic product (GDP) in the December quarter, NAB now forecasts the domestic economy to have contracted by one per cent in 2009 before growing by 0.9 per cent the following year.
Mr Oster said it was likely Australia has entered a recession.
“Our forecasts imply a moderate recession in 2009 – it would no longer be appropriate to classify these forecasts as a mild recession,” he said.
NAB expects the Reserve Bank of Australia to cut the cash rate to two per cent by late 2009, from 3.25 per cent currently.