Business confidence in Queensland has fallen over the past three months to less than half the level recorded at the same time last year.
The latest Sensis Business Index shows confidence among small and medium businesses is at its lowest since May 2001.
Report author Christena Singh says business owners are likely to remain pessimistic until sales and profits rise.
She says they are hopeful the Federal Government's stimulus package will encourage people to spend.
The ABC reports the index shows 43% of businesses interviewed experienced a drop in profit over the past three months, taking profitability to its lowest level since April 2001.
Ms Singh says low sales and continued weakening economic conditions are to blame.
She says most businesses do not expect sales to pick up before Christmas or over the next 12 months.
The survey also found the current economic climate has prompted many businesses to reduce their capital expenditure.