Business upbeat on economic outlook

As financial markets toy with the need for an interest rate cut by the Reserve Bank, a new survey suggests smaller businesses are upbeat enough without one.

The latest Sensis Business Index found confidence among small and medium-sized businesses at its highest in more than five years.

This was despite wages and profitability going backwards in the June quarter.

"Rather than being driven by these indicators, confidence is instead being driven by perceptions that the overall economic environment is improving," Sensis boss John Allan says.

Australian Chamber of Commerce and Industry head James Pearson jumped on the result, saying it should give firms greater confidence to hire staff.

He also hopes this will provide impetus for the new federal parliament to take action to reduce company tax, improve workplace flexibility and cut red tape so as to build on this confidence.

"Business is getting on with the job; it's time for the government and parliament to do the same," Mr Pearson told AAP on Thursday.

The newly formed 45th parliament sits on August 30.

Such confidence comes at a time when financial markets are predicting a near-60 per cent chance of the Reserve Bank cutting the cash rate when its board meets next week - normally a sign of a weak economy.

This follows Wednesday's official consumer price index for the June quarter which showed the annual rate of inflation at its lowest level in 17 years at just 1 per cent.

This is well shy of the central bank's 2-3 per cent target band.

New figures on Thursday showing prices for imported goods in the June quarter fell by 1 per cent suggests economy-wide inflation will remain low, with scope for a further decline in the near future.

"The fall in imported consumer good prices over the past quarter supports the case of a rate cut," Commonwealth Securities chief economist Craig James says.

At the same time, export prices rose by 1.4 per cent in the June quarter, helped by a rise in oil and iron ore.

Combined with the drop in import prices, it suggests Australia's terms of trade rose by around 2 per cent in the June quarter, the first increase in almost three years, and a positive for national income and the federal budget.