Calls are mounting for a rate cut by the Reserve Bank after new figures showed business conditions were wasting away, with little to no momentum building in the economy.
Conditions fell for the second month in a row in December, suggesting October's strong reading was just an anomaly, according to the National Australia Bank monthly business survey on Tuesday.
Business confidence managed a slight improvement thanks to lower oil prices, but still remained at its lowest level since its pre-federal election jump in 2013, the report said.
NAB economists still expect the RBA to cut rates twice in 2015, but said the cuts could start later than its previous forecasts of March and August, with the timing dependent on economic data.
It comes after Westpac's chief economist Bill Evans last week called on the RBA to slash interest rates to a fresh record low of 2.25 per cent at its February 3 meeting, saying a March cut would be "awkward" for the central bank.
UBS economists Scott Haslem and George Tharenou said the deterioration of business conditions in December added weight to the case for a near-term rate cut.
The figures indicated a loss of momentum in the economy despite the recent sharp depreciation of the Australian dollar "which historically provided a stimulus that drove a rebound in conditions", they said.
"Given this deterioration (amid a weaker global backdrop), a low enough CPI tomorrow could see the RBA take the path of least regret by cutting the cash rate in the near-term to 'insure' the recovery," they said.
ANZ senior economist Felicity Emmett said the sharp slide in confidence during the second half of last year was concerning, given the potential impact on non-mining business investment, which was crucial to the economy's recovery.
"Despite the small tick up in December, the weakness in business confidence remains worrying," Ms Emmett said.
"RBA governor Glenn Stevens flagged his own concerns over business confidence in mid-December and this is likely to be a key topic of discussion when the Board meets next Tuesday."
ANZ expects the RBA to flag a change in policy at next week's meeting before cutting rates in March, she said.
All interest will now be focused on the release of official inflation figures on Wednesday, amid growing expectations that a weak result will push the RBA to cut rates in coming months.
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