A new report underscores what Reserve Bank governor Glenn Stevens describes as a lack of "animal spirits" among the business community.
The survey shows confidence in the economic outlook among small businesses has dropped for four straight quarters, pointing to a grim 12 months ahead.
It suggests the Abbott government's promised small business package can't come soon enough.
Flagging the initiative again on Monday - it includes a small business tax cut - Prime Minister Tony Abbott said it will be one of a number of policies that will be announced in the run-up to the May budget.
"Small business is where our creativity most flourishes. Small business is where jobs creation gets going strongest and quickest," he told reporters at sportswear factory in Sydney.
The Australian Chamber of Commerce and Industry small business survey identified taxes and government charges as the biggest constraint to doing business.
"If all levels of government can ease the burden on small businesses, those businesses will be better placed to prosper," the chamber's CEO Kate Carnell said.
The survey`s expected economic performance index fell to 44 in the December quarter from 46.3 in the previous three months, the fourth consecutive quarterly decline.
It was also the third quarter below 50 that separates optimists from pessimists.
Although sales revenue is expected to rise, profits, employment, overtime, investment and selling prices are also expected to remain under pressure, while wages and other costs are expected to increase.
The report does not take into account the impact of this month's interest rate cut.
But JP Morgan chief economist Stephen Walters is sceptical that it will deliver much more beyond a "transient bounce" with sentiment low and fragile, partly owing to lack of reform and political instability.
"The economy's structural inadequacies will not be fixed by a small fall in the cash rate," Mr Walters said.
Meanwhile, smaller financial institutions want $3 million set aside in the May budget to implement recommendations from the Murray review.
In its 2015/16 budget submission, the Customer Owned Banking Association also wants a commitment to respond to the financial system review by May, an inquiry that was conducted by former Commonwealth Bank boss David Murray and handed down last December.
"Australian consumers will be the losers if this report is left to gather dust," COBA boss Mark Degotardi says.
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