Businesses report price pressure relief in March

The conditions for running a business remain healthy after the Reserve Bank of Australia's decision to pause interest rate hikes sent consumer confidence levels soaring.

Business conditions as measured by NAB in its monthly survey eased two points to +16 index points, which is still well above long-run averages.

Trading conditions stayed flat at an elevated +26 index points in March, suggesting businesses are still experiencing strong demand for their goods and services.

Both employment and profitability indicators fell slightly over the month but remained in positive territory. 

The monthly health check on the state of the business community also pointed to inflation passing its peak and starting to cool off, with both labour cost growth and purchase cost growth easing over the month.

NAB chief economist Alan Oster said there were encouraging signs of easing upstream cost pressures, particularly for non-labour costs like materials.

This was in line with the bank's view that inflation likely peaked but would remain elevated in early 2023. 

"Overall, the survey suggests the economy is still holding up and indicates there has been some easing in inflation, although there is still a long way to go to bring inflation back down to the RBA's target band and growth could be more volatile from there," Mr Oster said on Tuesday.

The survey also revealed a three-point uptick in business sentiment to -1 index point, a more modest improvement compared to the 9.4 per cent surge in consumer confidence for the month of April.

Unlike the NAB index, the separate consumer survey from Westpac and Melbourne Institute captured the post-April cash rate decision period that resulted in the central bank holding the cash rate steady.

The index lifted to 85.8 in April from 78.4 in March.

Westpac chief economist Bill Evans said the decision to keep the cash rate on hold after 10 consecutive hikes drove the strong recovery in the index.

"Confidence is now at its highest level since June 2022 although still 10.4 per cent below April 2022, the month before the RBA board began raising the cash rate," he said. 

Despite the rebound, he said the index was still weak and would likely be reflected in lacklustre spending through 2023 and the first half of 2024. 

Treasurer Jim Chalmers said the global economy was facing headwinds but he was "confident but not complacent" that Australia could avoid a recession due to its low unemployment, strong wage growth and high commodity prices providing a buffer.

Dr Chalmers, who is due to hand down his second budget in May, said the budget would focus on building resilience against international shocks.

He also confirmed the tax offset for low- and middle-income earners would end, in line with the former government's decision to wind down the relief measure.

The treasurer is due to head to Washington for key talks with world counterparts, with global financial uncertainty set to dominate discussions.