Paul Osborne, AAP Senior Political Writer
(Australian Associated Press)

Australian chief executives are optimistic about the year ahead, but concerned about rising energy prices, a new study shows.

The Australian Industry Group 2018 Business Prospects report, released on Wednesday, found investment plans and expectations of employment growth are higher than at any time since 2012.

“Looking to the year ahead, CEOs expect general business conditions, turnover, employment growth and gross margins to be all higher than at any time in the past five years,” Ai Group chief Innes Willox said.

Employment growth is expected to equal or exceed the 403,000 jobs generated in 2017.

However, the survey showed 85 per cent of manufacturers expect a further increase in energy prices, while competition from overseas and online businesses also ranked highly as a primary concern for them.

Services sector businesses consider the biggest barrier to growth is a lack of customer demand, with 49 per cent identifying it as their main concern – up from 29 per cent in 2017.

In the construction sector, CEOs cited energy prices and a lack of flexibility in industrial relations as negatives.

As the government prepares to make a fresh effort to get parliament to pass corporate tax cuts, the survey showed CEOs believed a 25 per cent tax rate would significantly strengthen incentives to invest.

“If wage outcomes continue to be moderate, if progress can be made on reducing energy costs and if the proposal to improve the competitiveness of our business tax system are enacted, 2018 could well be a stellar year,” Mr Willox said.

Treasurer Scott Morrison says further benefits will flow to the economy from reducing tax on business and middle-income earners, investing in defence and infrastructure, and entering into trade deals such as the Trans-Pacific Partnership.

“You need the dog-with-a-bone-like tenacity of the prime minister and the government that will not allow these opportunities to pass us by,” Mr Morrison told reporters in Brisbane.

Labor says the government has its priorities wrong in delivering a $65 billion tax cut to businesses, instead of helping low and middle income earners.

Labor frontbencher Jason Clare says independent economic modelling is needed to show the jobs benefits of trade deals.