Soft economic growth and a weakening jobs market mean another interest rate cut can't be ruled out, a leading business group says.
But Australian Chamber of Commerce and Industry acting chief economist Burchell Wilson concedes that a rate cut on Tuesday, when the Reserve Bank holds its first board meeting of the year, is unlikely given elevated inflation numbers.
The consumer price index unexpectedly jumped to a two-year high in the December quarter.
Mr Wilson said those figures were at odds with an economy that is growing below trend, a labour market that is deteriorating and wages that remain quite moderate.
"There is a real risk that that (inflation) number is a bit of an anomaly," he told reporters in Canberra on Monday.
"I think on that basis its premature to rule out the need for further rate cuts in 2014."
New data from the chamber indicate economic growth slowed in the final three months of 2013.
Its latest business expectations survey showed profitability and sales revenue were "very poor" in the December quarter, undermining investment and employment.
The business conditions index in the survey showed only a modest improvement to 44.9 points from 44.2 points, remaining below the key 50-point mark that separates expansion from contraction.
Notably, investment in plant and equipment has remained below 50 for its longest period in the almost 20 years that the survey has been conducted.
Even so, there was a modest improvement in most indicators.
"It's an encouraging sign that they are turning around but there is still a long way to go for business trading conditions to return to something more like normal conditions," Mr Wilson said.
The survey did produce one bright spot with the expected economic performance index rising to 54.3 points from 50.6 points, its highest since mid-2010.
"We need to see improved expectations translating into results,' Mr Wilson said.