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Australia business conditions strong in Aug, employment jumps

[SYDNEY] A measure of Australian business conditions climbed to its highest since early 2008 in August with a marked improvement in employment intentions burnishing the outlook for further jobs growth.

National Australia Bank's survey of more than 400 firms showed its index of business conditions firmed one point to +15 in August, triple its long-run average of +5.

Most industries reported solid activity, though the retail sector continued to languish in negative territory.

The survey's, often volatile, measure of business confidence slipped 7 points to +5, more than reversing a jump in July.

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Concerns about margins, demand and government policy all played a major part in the decline, the survey found.

"There was a notable jump in employment for August - to near record highs," said NAB group chief economist Alan Oster.

"If employment conditions maintain these levels, that should see more than sufficient jobs creation to push the unemployment rate lower."

The survey's employment index surged four points to +11, a major turnaround from earlier in the year when it was stuck around zero.

Mr Oster noted this outcome pointed to an annual job creation rate of around 270,000 in coming months, which should be enough to nudge the unemployment rate down from the current level of 5.6 per cent.

The official measure of employment has shown a sharp pick up in recent months, helping support household incomes and spending in the face of sluggish wage growth.

That was one reason the Reserve Bank of Australia (RBA) has kept interest rates at 1.5 per cent for more than a year even as inflation stayed stubbornly short of its target range.

The survey's measure of sales edged back a point in August to a still strong +18, while business profits also dipped a point to +15.

The forward orders index rose slightly to an above-average +4 points, driven by an especially large increase in manufacturing orders.

In contrast, the struggling retail sector saw orders fall sharply.

Firms reported some acceleration in labour and purchase costs from low levels, while retail prices slipped into negative territory amid intense competition in the industry.