The vast majority of chief financial officers believe Australia will avoid a recession even though the general climate of uncertainty is a major drain on already-low levels of business confidence, a new survey shows.

Levels of optimism among chief financial officers (CFOs) plummeted 14 per cent in the June quarter from already-low levels, the Deloitte CFO survey shows.

More than three quarters of CFOs surveyed believe Australia is facing a higher than normal levels of uncertainty.

CFOs nominated global economic uncertainty (35 per cent) and government policy uncertainty (36 per cent) as the major causes for their lack of optimism.

Carbon pricing and the strong Australian dollar were also identified as factors undermining confidence.

Deloitte chief executive Keith Skinner said that despite the apparent glum outlook, there were clear signs many CFOs expected the economic storms clouds to clear.

More than three quarters of CFOs surveyed said there was less than a 50 per cent chance Australia’s economy would contract in the next two years.

“Businesses appear to be in a solid position but exercising caution while the current conditions play out,” Mr Skinner said.

About half of the CFOs surveyed said they believed Australian companies were under-geared and could take on higher levels of corporate debt.

Mr Skinner said this suggested many companies were in good shape and were waiting for conditions to stabilise before investing in growth.

Deloitte partner Stephen Gustafson said the cost of credit was also an issue for many CFOs.

“The survey indicated a move away from external funding options like bank borrowing and corporate debt,” Mr Gustafson said.

“Most CFOs (72 per cent) now (identify) internal funding from retained profits as the most attractive option… it makes sense they would rely on cash reserves while they wait for the economy to improve and credit costs to drop.”