Trading conditions and confidence in small business in Austalia continued to deteriorate over the second quarter, with all the actual and expected indicators falling below their five-year averages, the August 2011 ACCI Small Business Survey shows.

“Over the June quarter, small business growth indicators and confidence continued their declining trend amid the appreciation of the Australian dollar, the prospect of rising interest rates and taxes, the increasing global uncertainties and the weakness in consumer sentiment and spending," said Peter Anderson, chief executive of the Australian Chamber of Commerce and Industry.

"The survey starkly reveals that small business performance lags significantly behind its larger counterparts. While small business continued to face downward pressure on selling prices and sales revenue, increasing wage cost and other operating costs have continued to put significant pressure on small business profitability.

"Escalating fears on European debt crisis and the possibility of economic slowdown in the U.S. over the recent weeks will exacerbate the already lacklustre small business performance.

Anderson said Wednesay’s survey, together with last week weakening labour force data, underscores the need for the Reserve Bank to resist lifting interest rates, despite inflationary pressures.

"Any further impost in current trading conditions such as the prospect of labour cost rises or higher energy prices is likely to further dent small business confidence and consumer sentiment.”

The survey also found business taxes and government charges remained the number 1 constraint on small business investment in the June quarter.