Australian business confidence has fallen to its lowest level since the September 2001 terrorist attacks.

The National Australia Bank's monthly business survey suggests economic growth in most sectors will slow to below 2 per cent in 2009.

But increasing resource prices, growing wages and employment, and continuing high fuel prices are predicted to keep inflation above 4 per cent for the next year.

The NAB says this will keep the Reserve Bank on inflation watch, and it predicts there may be more interest rate rises later this year before rates peak and begin to fall next year.

But the bank's regional business manager Geoff Greer says Australia's economic growth is still relatively robust.

"If you compare that to some of the other economies in the world, a lot of them would be looking at 2.75 per cent as a very good figure, so the fundamentals of the Australian economy are still very strong," he said.

New borrowing for housing has fallen sharply in March in another sign that interest rate rises are biting.

The Australian Bureau of Statistics says borrowing for housing fell 6.1 per cent in the month.

© 2008 Australian Broadcasting Corporation

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