One of the nation's major banks still expects the Reserve Bank will be in a position to lift interest rates next year despite the continued weakness in consumer spending.
National Australia Bank chief economist Alan Oster said demand for labour has strengthened and there have been hints of a slight pick-up in business investment intentions recently.
"With the labour market poised to see further improvement going into 2018, the economy now seems better equipped to deal with the challenges it faces," he said releasing his bank's monthly business survey on Tuesday.
This should leave the central bank scope to begin a shift away from the "emergency stimulus" of a record-low 1.5 per cent cash rate in the second half of next year.
Figures last week showed retail spending dropped for a second month a row, the worst performance in seven years.
The NAB survey also found the retail business conditions at negative levels compared to the strong result for other sectors, led by the construction industry.
"The sustained weakness in retail conditions should justifiably be raising doubts around expectations for any imminent - and sustained - rebound in consumer spending, although tough competition and other margin pressures are likely behind the result as well," Mr Oster said.
Business conditions overall in September remained at their highest level in nine-and-a-half years, prior to the global financial crisis, and almost three times their long-run average.
Confidence among firms also edged up, recovering from a sharp drop the previous month.
The report suggests there is sufficient strength in the employment growth outlook to put more downward pressure on the jobless rate.
A separate survey by business software provider Xero also showed small firms are booming with a near eight per cent increase in headcount over the past 12 months.
At the same time, the weekly ANZ-Roy Morgan consumer confidence index rose 0.4 per cent, recovering some of the previous week's decline.
Even so, ANZ senior economist Felicity Emmett said consumers were clearly under pressure from higher electricity and petrol prices, slowing house price growth, rising household debt and subdued wage growth.
"Ongoing improvement in the labour market and a corresponding increase in wage growth remain the keys to a material uptrend in confidence," she said.
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