Business still lacks appetite to employ

An improving trend in business is not likely to prevent unemployment from rising over the next year. Source: AAP

A MODEST improvement in business conditions is unlikely to stop the jobless rate rising over the next year, a leading business group has warned.

A depreciation in the Australian dollar will have helped business conditions to a degree but firms are still struggling, the Australian Chamber of Commerce and Industry says.

"They have limited appetite to invest and employ and that is unlikely to improve until there is a more sustained pick-up in trading conditions across the economy," the chamber's acting chief economist Burchell Wilson told reporters in Canberra on Monday.

"It is also telling us that the unemployment rate is expected to rise over the next 12 months."

The chamber's latest survey of investor confidence showed some positive trends, such as for sales and profitability, albeit coming off a low base.

The survey's business conditions index rose to 52.6 points in the December quarter from 51.1 points in the previous three months, which had been the first reading above 50 in almost three year.

However, while sales and profitability improved, they remain entrenched below the 50 mark that separates expansion from contraction.

The business expectations index also eased slightly to 55.5 points from 56.5 points.

The survey came as the Australian dollar slipped to a fresh three and a half year low towards 87.50 US cents, having been in a gradual decline since last Thursday's labour force date that showed weak employment growth in December.

The federal government in its mid-year budget released just before Christmas forecast the unemployment rate rising to six per cent by June, up from 5.8 per cent as of the end of last year.

The government expects the jobless rate to rise even further over the following year.

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