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Australia business conditions strengthen in August: survey

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An index of Australian business conditions rebounded in August as firms reported improved sales and profits, though confidence softened perhaps in reaction to political uncertainty as the country's prime minister fell to a party vote.

[SYDNEY] An index of Australian business conditions rebounded in August as firms reported improved sales and profits, though confidence softened perhaps in reaction to political uncertainty as the country's prime minister fell to a party vote.

The National Australia Bank's index of business conditions released on Tuesday regained 2 points to stand at +15 in August, well above the long-run average of +6.

The survey's measure of profitability climbed 6 points to +16 in August, recovering all of July's dip, while its sales index added 1 point to a strong +19.

In a promising development, the survey's employment index held firm at +10.

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"The employment index continues to suggest growth in employment of around 23,000 per month over the next 6 months," said NAB group chief economist Alan Oster.

"With a stabilisation in the labour force participation rate, this should be enough to see the unemployment rate decline further over the rest of 2018."

The official jobs report for August is due on Thursday and is expected to show the jobless rate stayed at a six-year low of 5.3 per cent.

The survey's often volatile measure of business confidence dipped 3 points to +4 in August.

The poll was taken just after the ruling Liberal Party ousted former Prime Minister Malcolm Turnbull and replaced him with Treasurer Scott Morrison.

The centre-right Liberal National Coalition has since slumped in opinion polls, leaving the centre-left Labor Party in a commanding position to win the next election.

Still, firms reported strength in their own businesses, with forward orders rising and investment plans picking up outside the mining sector.

"In combination with a rebound in business conditions this month, this suggests that the business sector has continued to perform strongly as we enter the second half of 2018," said Mr Oster.

The Reserve Bank of Australia (RBA) has highlighted the resilience of business conditions as it forecast economic growth would top 3 per cent this year and next.

Surveyed measures of inflation rose in August with labour and purchase costs higher, though growth remains subdued compared with history. 

REUTERS