LOW consumer confidence and an impending federal election mean an upswing in the non-mining economy is at least six months away, corporate leaders say.
"I think things have stabilised - not in a great place, but at least they have stabilised," said Elmer Funke Kupper, the ASX chief executive.
He welcomed a breakthrough in negotiations among US lawmakers over the "fiscal cliff", noting that it was "late, of course".
"I think Europe stabilising has been very helpful as well," he said.
Speaking before accounting firm KPMG's annual Couta Boat Classic, at Sorrento on Victoria's coast, Mr Funke Kupper said the removal of uncertainty over the fate of Spain, Portugal and Greece could help consumer confidence.
"I'm a little bit more optimistic about this year than perhaps I would have been six months ago but it all hinges on whether Europe is going to be OK and that's still untested."
He said the election "will give us another nine months of noise".
"We will probably have six months of very limited initiatives as people get ready for the election," he said. "There will be policy announcements but the actual impact will be limited - and I think that's not a bad thing."
But even with the election out of the way, Mr Funke Kupper does not expect a quick rebound in floats and other merger and acquisition activities, which have been in short supply for the past two years.
"I can't see it getting much quieter than it has been," he said. "I think it's more about financial year 2014 than financial year 2013. We need another six months of stability and confidence building ... [and] another interest rate cut.
"If Europe stabilises and we get through that and the next couple of months, we might start to see a bit more activity."
The chairman of KPMG Australia, Peter Nash, said this year would "no doubt be a difficult year".
He said signs of a soft landing to China's boom and a deal over the US fiscal cliff were good news.
"I wouldn't look to Europe for too much assistance but there are some positive signs," he said. "People will remain pretty cautious and prudent up until mid-year. Hopefully, as we get to the second part of the year, we'll see a little more growth."
He said the high Australian dollar was "not going anywhere" and the manufacturing industry needed to adapt to the new environment.
The chairman of Westpac, Lindsay Maxsted, said he was not pessimistic about this year.
"But I'm not that much more optimistic," he said. "Because if you think through all the factors that existed in 2012 that made people cautious ... they're all still there"
He said European central banks had done a good job restoring liquidity but the region suffered from high unemployment and social problems.
"I am bullish about America but they've still got this huge budget deficit," he said.
"The thing all of us should be hoping for is that it's not a hung parliament [in Australia], no matter which way it falls, so that governments can have a mandate and just get on with what they are elected to do."