The Australian Industry Group performance of services index fell 3.8 points to 56.2 in March, although still held above the 50-point mark, which separates expansion from contraction.
"Australia's services sector continued its positive run in March although the pace of growth slowed in the face of intensifying input price pressures, difficulties in finding staff and further wage pressures," Ai Group chief executive Innes Willox said.
"The strong lift in new orders reported in March will see the capacity of many businesses stretched over coming months while the availability of staff and the supply of inputs are expected to remain constrained."
Separate new figures may indicate whether the labour market has tightened even further and that the unemployment rate is about to fall below the four per cent level for the first time in nearly 50 years.
The Australian Bureau of Statistics will release its payroll jobs report for the fortnight to March 12 on Thursday, a guide to the full March labour force report due for issue next week.
The unemployment rate fell to a 14-year low of four per cent in February.
Both the Reserve Bank of Australia and Treasury are predicting the jobless rate will fall to 3.75 per cent later this year, a level not seen since 1974.
But some economists are predicting a sub-four per cent rate could come as early as March.
A speedier decline in unemployment will add to speculation that the RBA could hike the cash rate as early as June.
The ABS will also release international trade figures for February on Thursday.
The consensus among economists points to a surplus of $12.1 billion, a shade below the $12.9 billion surplus recorded in January.
However, economists at Westpac are forecasting a $13.2 billion surplus, a whisker below the record $13.3 billion record set last July.
They expect exports will be buoyed by higher global prices and volumes for coal and LNG, extending the 7.6 per cent surge in exports seen in January which was led by iron ore.
The Department of Industry, Science, Energy and Resources' March quarter resources and energy report released earlier this week forecasts export earnings to surge to a record high of $425 billion for the 2021/22 financial year.
The report notes Australia's combined coal export earnings are forecast to rise to about $110 billion in 2021/22, with international coal prices at record levels as the war in Ukraine and the ongoing La Nina weather conditions affect supply and demand.
"Coal becomes only the second Australian commodity after iron ore to break through the $100 billion annual export mark," Resources Minister Keith Pitt said.
11°C