The Reserve Bank of Australia (RBA) appears to be succeeding in its battle against inflation but the vast majority of businesses expect the global credit crisis to affect them, a survey suggests.
The latest Dun and Bradstreet business expectations survey found selling price expectations for the June quarter were at an 18-month low, following an eight percentage point decrease since the March quarter.
Just 50 per cent of companies now expect to raise prices in the quarter ahead, with five per cent expecting prices to fall.
Expectations for sales and profits had also fallen, the survey said.
Tight financial markets and the difficulty of accessing credit due to the collapse of the subprime mortgage market in the US have executives worried.
In the highest level yet recorded by the survey, 71 per cent of executives expect tight credit markets to have a negative effect on their businesses because of the increased difficulty of accessing finance.
The number of executives with expectations of increasing profits compared with those that did not narrowed to just three index points - 32 per cent expect an increase and 29 per cent a decline.
Dun and Bradstreet chief executive Christine Christian said the effect of the global credit crisis and higher interest rate levels were "hitting Australian businesses".
"The (15 per cent) surge in executive concerns about tightening credit conditions and the continued high level of unease regarding interest rates indicate that the impacts of the credit crisis have well and truly hit our shores," Ms Christian said in a statement.
"Businesses are now operating in an environment where cash is of paramount importance, yet they are being forced to deal with tighter lending standards and business payments that are more than three weeks overdue."
Ms Christian said the RBA's decision to leave interest rates on hold at 7.25 per cent last week was a move that would "no doubt be welcomed by executives".
Despite this month's reprieve, high interest rates remain the biggest concern for executives for the third straight month, the survey found.
Thirty-six per cent of respondents said it was the "most important influence on their businesses in the quarter ahead", more so than wages growth,at 21 per cent.
Only 15 per cent said the cost of fuel was their No.1 worry, which was the lowest figure recorded by the survey.
Dun and Bradstreet's economic consultant Dr Duncan Ironmonger said the recent interest rate rises were slowing the economy and easing the pressure on inflation.
"The latest D&B survey supports the view that demand growth and inflation are moderating," Dr Ironmonger said in a statement.
Dr Ironmonger said next month's federal budget would "influence any decision by the Reserve Bank to adjust rates in the coming months".
Employment expectations showed a slight increase - 15 per cent of executives forecast an increase in staff numbers in the quarter ahead and 11 per cent that expected a reduction.
