BUSINESSES continue to expect improved trading conditions, according to the latest Australian Chamber of Commerce and Industry Westpac Survey.
The December quarter report found general business expectations for the next six months continued to rise, although the lift was slower than that recorded in the September quarter.
Expectations of labour shedding had fallen with a stable employment outlook, but expectations of capital expenditure fell slightly, as did expected spending on buildings and exports.
Chamber chief executive Peter Anderson said the continued improvement was welcome but said more action was needed to stimulate business activity.
"That's why passing the carbon tax repeal before Christmas would ease energy cost rises, add to industrial competitiveness and also lock in the firming confidence this survey reveals," Mr Anderson said.
"Profit margins are being squeezed with input costs increasing, while manufacturers' ability to pass on rising costs through price rises remains very constrained.
Westpac economist Elliot Clarke said the survey results showed there needed to be continued investment in the non-mining sectors and increased consumer spending and residential investment.
"Conditions in the manufacturing sector are still soft relative to history," he said.
"Key to the outlook for the sector will be whether this improvement in activity persists as expected, the impact of low rates on housing investment, and the ongoing impact of the historically-high Australian dollar on external demand.
"At present, firms look to have put a halt to job shedding but are seeking to maximize the productivity of their current staff.
"The RBA is currently focused on talking down the currency to stimulate the economy.
"We remain of the view that this strategy will prove ineffective, making additional rate cuts necessary in 2014."