Business confidence is at record lows, with the global financial crisis dealing a blow to sales and profitability, a new survey shows.
That's bad news for employees with business expecting to be forced to lay off workers in 2009 as a result.
The Australian Chamber of Commerce and Industry (ACCI) says the retail banks are partly to blame for the gloomy outlook because they've refused to pass on cuts to the official cash rate in full.
"We think it's time the banks played their part," the chamber's director of industry policy and economics, Greg Evans, told reporters on Tuesday.
"Small businesses have not received the full official rate reduction and that's impeding economic expansion in Australia."
The latest ACCI Survey of Investor Confidence shows business endured extremely rough weather in 2008 and this year would be even more challenging, Mr Evans said.
"Current trading conditions are at their lowest level since the survey began in 1998 and (businesses') view for the 2009 first quarter is also at its lowest level since the survey began."
The survey's index on business conditions shows that in the three months to December confidence plummeted.
It fell from 57.3 in September to 53.5 - the lowest level since the survey began and 10 points below the five year average of 63.7.
The sales index fell from 54.9 to 51.4, while the profitability index fell from 49.3 to 48.2, its lowest level in more than seven years.
The index looking at expected activity also fell to a record low, down to 46.4 from 51.4 in the September quarter.
But the really bad news for workers is that the index examining the expected number of full-time employees is now on par with the record lows seen in the first half of 2001.
ACCI expects unemployment to rise to around five per cent by the middle of the year.
But despite all the doom and gloom, Mr Evans says a recession isn't inevitable.
"Australia certainly has a number of economic advantages," he said.
They include the strength of the Australian dollar, scope for further stimulus packages and rate cuts, and strong trading links with economies that are still growing, including China and India.
But none of that will really help unless the banks pass on cash rate cuts in full, Mr Evans said.
Some small businesses had only received half of the combined three per cent cut in the official cash rate since September, he said.
"As financial market instability subsides, and we believe that is substantially happening, we would expect that full rate reductions are passed through.
"That's almost happened with respect to housing borrowing and we think it's now time for small business to obtain the same benefit."
The federal opposition says the Rudd government needs to do more to lift the tax burden on small business.
Deputy Opposition Leader Julie Bishop said that record low business confidence levels painted a bad outlook for jobs in 2009.
Ms Bishop says many industries are suffering.
"The government has made the car industry much riskier because it introduced a new car tax at a time when businesses and consumers can least afford it," Ms Bishop said.
"And its bungled unlimited bank guarantee undermined vehicle financing."
Ms Bishop says data just released shows new car sales in 2008 fell by 11 per cent.
"The Rudd government must take whatever steps it can to cut unnecessary charges and reduce taxes on business so that business can continue to secure jobs," Ms Bishop said.
"And business is still concerned that it is not receiving the benefit of the three per cent cut in official cash rates."
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