Australia is more at risk from a delicate global economy than from whoever wins the federal election, a leading business group believes.
Prime Minister Kevin Rudd warned on Sunday the economy could tip into recession if the coalition won government and implemented large spending cuts to pay for its policies.
Australian Chamber of Commerce and Industry (ACCI) chief economist Greg Evans said he wouldn't tie such a downturn to domestic events, saying he was more concerned about the international economy.
"It's a fairly fraught economic environment, and it needs to be managed carefully," Mr Evans told reporters in Canberra on Monday.
Business confidence was very low and the economy was clearly already growing well below trend, he said.
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Treasury has forecast growth of 2.5 per cent in 2013/14 - below trend growth of about 3.25 per cent.
Treasurer Chris Bowen stood by Mr Rudd's warning, saying when austerity programs are followed they impact on economic activity.
"Massive cuts to government expenditure could lead to a recession, it's a statement of fact," he told reporters in Brisbane.
ACCI's latest small business survey showed the sector remained in the doldrums with selling prices notably weak, sinking to a 17-year low.
"Business is under considerable pricing pressure in the market place, it's not able to lift its own prices and it continues to be squeezed by higher costs," Mr Evans said.
"That's having an impact on the bottom line and profitability."
Lower interest rates are yet to make their mark, with Mr Evans noting overdraft rates for businesses were still about eight per cent compared with mortgage rates below six per cent.
A separate survey of consumers by Westpac and the Melbourne Institute found 41 per cent of respondents expect interest rates to be higher by August 2014.
Although this was the same as a similar survey in February, there is now a higher proportion expecting rates to stay on hold for the next year - 36 per cent compared with 30 per cent.
"The clear message is that most consumers do not expect mortgage rates to come down any further over the next 12 months," Westpac senior economist Matthew Hassan said.
Meanwhile, business groups welcomed the coalition's small business policy that includes cutting red tape costs by $1 billion a year.
Opposition Leader Tony Abbott said Labor has made it harder to invest, to employ and to work at every turn.
"I have so much confidence in the people of Australia, but we need a government which works with them not one which is constantly trying to put obstacles in their way," he told reporters in Sydney.
CPA Australia chief executive Alex Malley said while small business is the engine room of the economy, it has been misfiring under the strain of over regulation and a lack of confidence.
"When business is confident, jobs are created," he said in a statement.
