The report by the Housing Industry Association (HIA) found little expectation of a short-term improvement in a weak residential housing market with nearly half of respondents expecting no change in conditions.
More than 50 per cent of respondents expected a further contraction in already tight profit margins while 70 per cent expect some degree of tightening in credit availability.
The association's inaugural Business Expectations Report surveyed more than 1,650 respondents across a wide range of businesses within the housing industry.
"Given that such a subdued set of business expectations comes at a time when new building is already enduring a fifth straight year of weakness, the importance of recent and future interest rate cuts is immediately apparent," HIA's chief economist Harley Dale said.
The Reserve Bank of Australia cut its cash rate by a full percentage point earlier this week, on the back of a quarter percentage point easing in September.
Financial markets are predicting further rate cuts in the months ahead.
"An easing monetary policy cycle over the next 12 months will provide both households and businesses with needed relief on borrowing costs and create an environment where budding first home owners can contemplate dipping their toe in the market," Dale said.
"At the same time it remains vitally important that all levels of government play their part in ensuring structural barriers to housing come down so that the residential sector can play its traditional role in leading economic activity in Australia back up again in 2009/10."
