The Westpac-Melbourne Institute leading index which indicates economic activity in three to nine months rose 1.7points in April, giving an annualised growth rate of -3.5per cent. This was up from -5.1per cent in March, but 6.3points below the long-term trend.

''[The] index adds confidence to the view that the worst may be over and that economic growth may have started to rebound,'' it said.

Westpac chief economist Bill Evans said February appeared to be the low point of the cycle, although unemployment was expected to continue to rise. ''The February read was the lowest since 1982. Its current pace is still consistent with the Australian economy contracting in the June and September quarters, but if this rate of improvement in the growth rate continues, we can look to positive growth in the first half of 2010.''

A technical recession is two consecutive quarters of negative growth.

March's national accounts showed 0.4per cent growth, partly because of the Government's cash handouts, after a 0.6per cent drop in the December quarter. Sensis's small and medium business index showed confidence rebounded strongly in the past quarter from historic lows, rising 18 points to show a net 30per cent of firms optimistic about their future.

There is a little less optimism in the ACT, though, at a net 27per cent up from 7per cent in February, but the second lowest in the country.

Nationally, three in five believed the economy was slowing and 36per cent down from 47per cent three months ago thought this was affecting their business.

Employment expectations for the year ahead rose, with a net balance of 7per cent, an improvement of 6percentage points from last quarter. The ACT recorded the worst result here, at -9per cent.

It comes as Australian Bureau of Statistics data showed residential building starts hit an eight-year low of 30,949 in the March quarter. This was a 4per cent drop on the December quarter, which in turn recorded a revised fall of 11.5per cent.