Small businesses are benefiting from improved trading conditions and confidence, but are still lagging their larger counterparts.

As a result Australian Chamber of Commerce and Industry head Kate Carnell is urging the Turnbull government not to forget the sector when undertaking important policy reforms.

“Encouraging small businesses to invest and employ is fundamental to finding jobs for the 740,000 people looking for work,” she said on Monday as she released the chamber’s quarterly small business survey.

• Aus snubbed in Syria talks
• Terror attack hits shares
• ‘Reconsider trips to Paris’

While the report showed small business conditions and confidence improved during the September quarter, after a weak start to 2015, they remain subdued compared to their larger business counterparts.

Small business conditions edged up to an index of 42.6 points in the September quarter from 42.3 in the previous months.

This is the first increase in over a year and brings the index to around its five-year average, albeit remaining below the crucial 50-point mark that separates expansion in the sector from contraction.

Likewise, the index for expected economic performance over the next 12 months rose to 45.4 points from 44.3 after falling for five consecutive quarters.

“The recent improvements to conditions are promising … (but) wage pressures appear to be on the rise, and non-wage labour costs remain elevated,” she said.

– AAP