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Australia business confidence rises to 9-mth high: NAB

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Australian business confidence rebounded to a nine-month high in May as sales and profits improved, likely reflecting the impact of record-low interest rates and a better received government budget, a survey showed on Tuesday.

[SYDNEY] Australian business confidence rebounded to a nine-month high in May as sales and profits improved, likely reflecting the impact of record-low interest rates and a better received government budget, a survey showed on Tuesday.

National Australia Bank's monthly survey of more than 400 firms showed its index of business conditions rose 3 points to +7 in May, from April when it dipped 2 points.

Its measure of business confidence climbed four points to +7, the highest reading since August last year. "Confidence appears to have received a boost from interest rate cuts, better conditions and perhaps some relief over a more politically sellable Budget compared to last year," said NAB's chief economist Alan Oster.

The Liberal National government of Tony Abbott's May budget included tax breaks for small business that were well received, though there was little in it for large-scale firms.

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Any improvement in sentiment would be welcome by the Reserve Bank of Australia (RBA) which has bemoaned a lack of business"animal spirits". That was a major reason the central bank cut rates to an historic low of 2 percent last month.

Confidence was significantly higher in retail and wholesale, along with finance, business and property services. Mining confidence, on the other hand, fell sharply.

The survey's measure of business conditions was also the highest since October last year. "This has helped to cement the steady upward trend we have seen in recent months and is a welcome sign that the non mining sector may be improving in the face of policy adjustments and a lower currency," said Oster.

Sales, profits, forward orders and exports all picked up in the month.

There was a promising sign for spending plans as the survey's index of capital expenditure rose 4 points in May to +10, well above its long-run average of +5.

The weakness of business investment has been a major disappointment for policy makers in recent months.

REUTERS

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