Slashing costs has allowed Australian companies to squeeze out earnings growth over the past year.

But investors have become increasingly worried that the cost-cutting drive has played out and profits from a subdued economy will now be hard to come by.

Australian listed companies grew earnings by 6 per cent in the 2013-14 financial year, but sales grew just 3 per cent, according to Deutsche Bank research.

"There is concern that much of the growth was driven by efficiency programs, which aren't a sustainable driver of earnings. With little sign of a top-line acceleration, the fear is the earnings recovery could fizzle out," the German investment bank's local equity strategist Tim Baker said.

However, Mr Baker reckons that Australian companies could continue to cut costs, pointing to the US as an example.

"US companies are closing in on their fourth consecutive year of generating moderate earnings growth from only soft top-line growth," Mr Baker said.

The mining boom helped push Australia's nominal gross domestic product growth far higher than the US, Mr Baker said, but Australia's labour productivity growth was far less than America's.

Room for cuts

This leaves room for companies to cut inefficiencies, which Australia has only been doing for two years, compared with America's four, Mr Baker said.

"With it becoming clearer over the past year or so that macro conditions aren't accelerating quickly, a wide range of companies have embarked on efficiency programs," Mr Baker said.

The potential fror cuts are largest in the resources sector, but there is still a broad-based opportunity, Mr Baker said.

Financial services was another area that still had cost-cutting potential, he said.

While Australia's big four banks had driven record earnings through cost cutting, Mr Baker said that after decades off double digit credit growth, it will take more than two years to drive all the efficiency gains possible.

Less room to move

However, Perpetual's head of equities Matt Sherwood believes the cost-cutting drive only has another 12 months in it.

"When we look at Australia, we won't be able to record the kind of cost-out savings that the US has, because we have a less flexible industrial relations system," Mr Sherwood said.

The Australian industrial relations system is far more rigid and gives less room for corporations to manoeuvre on their cost drive plans, he said.

"Labour is around two thirds to three quarters of a company's cost base, depending on its structure and what industry it's in, so there's not as much ability in our IR system that we've seen in the United States."

A weaker Australian dollar and low interest rates are helping, but new business investment is not closing the gap in investment left by the mining sector's investment slowdown.

"I tend to think it's going to be harder for Australian corporations to record revenue growth in the next 18 months. The economy is going to remain sub-trend, we're in the major period of the mining investment cliff," Mr Sherwood said.

Green shoots

There are green shoots in the corporate community, though. Capital expenditure plans over the next 12 months have hit a three-year high, TD Securities head of Asia-Pacific Research Annette Beacher points out.

"There is a big economic hole to fill once the $265 billion mining investment boom passes from view, and the RBA continues to express concern about the transition," Ms Beacher said.

"However, we are comforted by [last week's NAB quarterly business] survey showing a three-year high in the investment balance of +22 [points], now double the +10 trough set in late 2012."

Those numbers also bode well for business lending, which is languishing at annual growth rates of around 3 per cent.

"A reasonable forecast" to draw from the higher capex plans as revealed in NAB's survey is for higher business lending, which should be growing near 4-5 per cent in the coming 12 to 18 months, up from current subdued levels of 3 per cent, NAB's global head of research, Peter Jolly, wrote in a note on Monday.

Mr Jolly admits that business credit growing at 4 to 5 per cent "would hardly be a 'boom' in the historical sense", but adds: "even so, the prospect of firms expanding both their capex plans and borrowings would be signs of a modestly improving economy".