Business conditions fell sharply last month, shortly after US President Donald Trump announced plans to slap at least $US50 billion worth of tariffs on Chinese imports.
National Australia Bank believes Mr Trump's policy direction may have impacted sentiment and resulted in business conditions falling by a steep 30 per cent (or 6 points) to +14.
Back in February, conditions had surged to a record high of +21, according to NAB's respected business survey.
Despite the steep fall in March, the result is still significantly higher that the historical average of +5.5.
Business confidence also dropped by 22 per cent (or 2 points) to +7, which is sitting just above its historical average of +6.
Mining soars, while retail lags
NAB found that a fall in several of its survey components — trading conditions (sales), profitability and employment conditions — affected its March results.
Business conditions slipped in every industry except for manufacturing, as well as personal and recreational services.
But it was the mining sector which came out strongest in terms of business confidence and conditions — something which has not happened in almost six years.
The bank noted the bounce in mining business conditions was linked to an increase in the Reserve Bank's index of commodity prices.
But the downside was that NAB forecast commodity prices, particularly iron ore and metallurgical coal, would ease as the year progresses.
"If realised this would place pressure on mining sector conditions and confidence later this year," NAB noted.
Once again, conditions in the retail sector was an underperformer compared to other sectors, but returned its highest reading in nine months (in trend terms).
The lowest reading for business confidence was found in recreation and personal services.
RBA rate hike in 2018
"The survey results for March do not change our outlook for the Australian economy," said NAB's chief economist Alan Oster.
"The strength in business conditions and leading indicators are consistent with stronger economic growth in coming quarters.
Mr Oster remains optimistic compared to other economists, and expects the RBA will lift the official cash rate from its record low 1.5 per cent towards the end of the year.
Many others are predicting an interest rate hike to happen in 2019 at the earliest.
However, Mr Oster's caveat is that his view "it will depend heavily on the data flow — particularly for wages and inflation".
