A key business group believes the unemployment rate could hit 6.
5 per cent later this year, as a survey shows firms are still reluctant to invest and hire staff.
Trading conditions remained difficult in the first three months of 2014, an Australian Chamber of Commerce and Industry’s survey of investor confidence showed.
Sales and profits remained weak, the latter falling back towards a recent record low.
The chamber’s acting chief economist, Burchell Wilson, says such trading conditions are undermining the willingness of business to invest and employ.
“This challenges the view that there is going to be an upswing in non-mining investment that will offset the downturn in the resources sector in the year ahead,” he told reporters in Canberra on Monday.
The business conditions index eased to 49 points in the March quarter from 50.6 points in the previous quarter – back below the key 50-mark that separates contraction from expansion.
The survey’s employment index fell to 43.4 from 45.1, having been sub-50 since June 2010, while the climate for investment was particularly poor at an index of 40.
Based on the survey figures, unemployment was expected to move higher, Mr Wilson said.
“There is a risk that we see it moving towards more like 6.5 per cent by the end of the year,” he said.
That would be higher than the 6.25 per cent forecast by Treasury.
Labour force figures for March are released on Thursday with some economists expecting an increase from the six per cent rate recorded in January and February.
Survey respondents expect inflation to increase and interest rates to rise, despite also expecting wage growth to moderate and the unemployment rate to increase in the next six months.
The survey also found business taxes and government charges remain the biggest constraint to doing business, followed by insufficient demand.
Interest rates, charges by lending institutions and raising a loan also crept into the top 10 of perceived constraints.