A survey of business conditions indicates the worst of the economic downturn may have passed.

The National Australia Business Bank (NAB) monthly business survey showed the index of business conditions in April rose back to levels last seen in late 2008 and early 2009, gaining by seven index points to minus 10 points.

The results of the April survey indicated moderate growth in demand early in the second quarter of 2009, NAB said.

“There is little doubt that the results of the April survey represent the most encouraging set of numbers for some time,” NAB chief economist Alan Oster said.

“While it is perhaps unwise to put too much emphasis on one month’s results, the April survey does seem to point to a stabilisation of confidence at levels around those reported in late 2008 and early 2009.

“That is, at levels significantly above the fear-driven readings of January and February.”

All components of business conditions, including trading, profitability, forward orders and employment, improved in April’s survey.

Mr Oster said a lift in business conditions during April was “even more encouraging”.

“While government stimulus packages are no doubt a key driver of the recent jump in activity reported in retail and transportation, at least there are now signs that the falls in demand may be easing,” he said.

Commsec economist Savanth Sebastian said the survey highlighted conditions for businesses were no longer declining as the global economy had hit a bottom.

“No doubt an improvement in trading conditions, strength in equity markets and tentative signs of a global recovery has played a significant part in businesses being less pessimistic,” Mr Sebastian said.

Meanwhile, business confidence was little changed in April and has stabilised at levels higher than the dire readings in early 2009 that were caused by fears of a global financial collapse, NAB said.

NAB retained its forecast for the jobless rate to rise to 6.75 per cent by the end of 2009 and almost eight per cent in 2010.

Australia’s unemployment rate fell 0.3 per cent to 5.4 per cent in April, Australian Bureau of Statistics data released last week showed.

Despite a rebound in April’s jobs data, the NAB survey’s employment index indicated more job shedding, Mr Oster said.

“Overall, the key message from the survey on employment is that the pace of job loss has slowed rather than a fundamental change in the prospects for rising unemployment.”

NAB’s forecasts for the Australian economy also remain unchanged.

The bank expects gross domestic product (GDP) to contract by one per cent in 2009 and grow by 0.9 per cent in 2010.

“These forecasts reflect the poor start to 2009 together with weaker exports and business investment, given the global outlook,” Mr Oster said.

Mr Oster said he forecast the Reserve Bank of Australia (RBA) would lower the cash rate from its current three per cent to 2.5 per cent by the end of 2009 in increments of 25 basis points in November and December.

“The RBA is in data-watching mode having delivered the bulk of the emergency cuts,” he said.

Between September and April, the RBA lowered the cash rate by 425 basis points to three per cent.

AAP