Australian business confidence slumped to its lowest level in more than three years in November, while conditions stayed weak, bolstering the case for further cuts in interest rates, a report on Tuesday showed.
The monthly survey of around 600 firms by National Australia Bank found firms worried about tighter fiscal policy, a high local dollar and a soft global economy.
The survey's main measure of business conditions was steady at -5 in November for a second month, remaining at the lowest since May 2009. The index of business confidence fell 8 points to stand at -9, the weakest reading since April 2009.
"Pessimism is the word this month," said NAB chief economist Alan Oster. "The subdued outcome was fairly broad-based across industries, implying recent rate reductions by the RBA have not yet materialized into stronger demand."
"Overall, the survey implies a significant slowing in underlying demand and GDP growth in the December quarter, both easing to around 2.25 percent - clearly below trend."
Oster said the path for interest rates now appeared even lower, with one more rate cut likely before the middle of next year.
Last week, the Reserve Bank of Australia (RBA) cut its cash rate rates by a quarter point to a record-matching low 3.0 percent.
(Read more: What Will the Aussie Central Bank Do Next?)
Financial markets are pricing in around a 60 chance of a cut in the cash rate to 2.75 percent in February, when the RBA holds its next policy meeting. Markets see a further easing to 2.50 percent or lower next year.
"The slump in confidence is likely to in part reflect businesses becoming depressed about the weak level of activity in the economy at present, while concern about the outlook for Australia's mining sector may also be playing a part," Oster said.
The survey showed conditions were particularly challenging in construction, manufacturing and wholesale - despite a slight improvement in the month, while forward looking indicators of demand signaled more weakness still to come.
The report's measure of profitability eased 2 points to -9, while that for forward orders fell 5 points to -11 in the month, led by weakness in the mining and manufacturing sectors.
However, the survey's index of capital expenditure rose 4 points to 0, partly unwinding a modest fall in the previous month and reflecting a sharp rise in transport & utilities and wholesale.
Employment conditions also improved across all industries in November, except for transport & utilities. The most notable improvements were reported in manufacturing and recreation & personal services.
Measures of inflation were benign with final product prices remaining subdued. Labor costs picked up slightly, but the overall pace stayed low compared to recent history.