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Business confidence in Australia rose in August and at a marked pace as uncertainty in global markets dissipated somewhat, fresh data showed on Tuesday. Business conditions, meanwhile, was still subdued.
Reports said the National Australia Bank business confidence index rose to 11 in August from 2 in the previous month. A reading above zero indicates pessimists are outnumbered by optimists.
The sharp rise in sentiment comes in a month in which the Reserve Bank of Australia held the cash rate unchanged at 4.5% and raises the central bank's scope to resume raising rates. The NAB expects the cash rate to be raised steadily to 5.5% by the end of 2011.
Confidence improved strongly in wholesale and manufacturing but fell in mining. The NAB said that the fall in mining sentiment could be partly due to the uncertainty about the outcome of Australia's federal election and slowing growth in China.
Australian Prime Minister Julia Gillard secured her return to power last week with the support of two rural MPs, after several weeks of talks following the inconclusive election.
Meanwhile, the business conditions index remained muted at 5 in August, suggesting the relatively high interest rates were curbing businesses.
Conditions improved in manufacturing, recreation and construction, but deteriorated in mining, finance, transport, wholesale and retail.
Both the employment and trading sub-indices dropped during the month. The forward orders index improved slightly but remained at a depressed level.
The NAB revised upwards its growth forecasts for the Australian economy. The country's gross domestic product is now tipped to grow 3.25% this year, up from 3%.
The Australian economy grew 1.2% between April and June compared with the March quarter, speeding from the 0.7% growth in the prior quarter. On a year-over-year basis, the Australian economy grew 3.3%.
The NAB expects the Reserve Bank of Australia to hold off from further interest rate rises for the rest of the year, unless the September quarter inflation numbers come higher than expected.
Australia has been shielded from the worst of the global downturn due to huge government spending and massive demand, particularly from China, for its abundant mineral resources. The mining boom has drawn a large amount of investment into the country and this upturn is forecast to last for many years.
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