Business confidence surged in December, despite trading conditions and profitability remaining poor.
National Australia Bank's Monthly Business Survey shows confidence jumped from -9 in November to +3 in December, as another interest rate cut, the avoidance of the US fiscal cliff and signs of economic improvement in China all boosted the business outlook.
However, current conditions remained subdued, rising from -6 to -4, but still stuck firmly in negative territory.
Profitability also rose from -11 to -6; employment rose 2 points to -3; and forward orders improved 6 points, but also remained negative at -5.
Trading and exports got slightly worse, both falling 1 point to -4.
NAB's chief economist, Alan Oster, remains downbeat on the economic outlook, despite the bounce in confidence.
He says a deterioration in the wholesale sector does not bode well for the broader economy.
"Wholesale business conditions collapsed in the final months of 2012 - to its lowest level in the history of the survey (since 1997)," Mr Oster noted in the report.
"The weakness in wholesale conditions is a real concern as it appears to be a leading indicator of overall business conditions." NAB is forecasting Australian economic growth of just 2 per cent this year, before a recovery to 3.3 per cent (around average levels) next year, with unemployment rising to 5.75 per cent by the middle of this year.
In that context, the bank expects three more official interest rate cuts this year, starting with one 25-basis-point cut next month, taking the official cash rate down to 2.25 per cent.