Business conditions continue to weaken in March although at a slower pace than in February, a survey shows.

The National Australia Bank (NAB) monthly business survey’s measure of business conditions rose three index points to minus 17 points, a level last seen in June 1992 in the aftermath of the last recession.

The measure of business confidence rose nine index points in March, to minus 13 points, an improvement for the second consecutive month.

A reading below zero indicates that pessimists outweigh optimists.

NAB chief economist Alan Oster said businesses continued to struggle in a difficult financial environment.

“At best, the pace of decline in business conditions in March may be stabilising but at levels that imply further negative growth and are still the worst seen since 1992,” Mr Oster said.

“Every sector in trend terms is still reporting significant further deterioration in activity levels.”

Business confidence improved for the second month in a row, Mr Oster said.

“Indeed, the sectors which had led recent declines have in March led the improvement, notably mining, manufacturing and finance and business services,” he said.

“Retail confidence also continues to benefit from prospective government cash handouts.

Mr Oster said the main concern of the survey was the ongoing rapid fall in employment – down to a level last experienced in September 1991.

The bank has lifted its forecast for Australia’s unemployment rate to 6.75 per cent by the end of this year and 7.75 per cent in 2010.

“The message from the survey is that a significant deterioration in employment is underway and will continue to show in the official numbers – with dire consequences for unemployment,” Mr Oster said.

The rate of unemployment rose half a percentage point to 5.7 per cent in March, a five-year high, the Australian Bureau of Statistics said last week.

NAB forecasts a moderate recession in Australia during 2009, with gross domestic product (GDP) expected to shrink by one per cent in 2009 and grow by 0.75 per cent in 2010.

“It needs to be stressed that we see no fast recovery in Australian activity,” Mr Oster said.

Mr Oster forecasts the Reserve Bank of Australia to lower the cash rate from a current three per cent to two per cent by the end of 2009, with the timing of rate cuts dependent on more bad economic data.

Westpac Economics said the rise in business confidence brought it back in line with readings for consumer sentiment.

“We would still expect to see business cutting back on investment and hiring, notwithstanding this partial rebound in confidence,” Westpac Economics said.