Australia onward and upward for second quarter

CANBERRA - Australia's economy continued to expand in the second quarter.

This was despite a slightly softer employment outlook as business confidence remained high and exports rose, a quarterly survey showed on Tuesday.

The poll, by the Australian Chamber of Commerce and Industry (ACCI)/Westpac, found 35 per cent of manufacturers surveyed expected an improvement in the business situation in the next six months, virtually unchanged from 36 per cent three months ago.

The proportion expecting a deterioration rose to 15 per cent from 11 per cent last quarter, as business confidence eased slightly but remained at relatively high levels.

"The Australian manufacturing industry remains strong. Solid, sustained growth is under way," said ACCI chief executive Peter Hendy.

The survey also showed demand continued to strengthen in the June quarter, while output rose "very strongly" and 13 per cent of firms surveyed said insufficient capacity was their main constraint.

Capacity use remained at historically high levels and 82 per cent of the manufacturers surveyed reported working at or above their normal levels.

Westpac's general manager of economics, Bill Evans, said the outlook for investment was also encouraging, despite a slight cooling in capital expenditure plans from three months ago.

One quarter of manufacturers surveyed reported plans to lift spending on plant and equipment, down from 35 per cent in the March quarter, while only 15 per cent expected a decline, down from 17 per cent.

"A recovery in business investment remains the key to the maintenance of the current strong economic activity," Evans said.

While forward projections for employment growth remained positive, the labour market softened slightly in the quarter. A marginally negative net outcome was predicted for the next quarter.

"While falling short of very strong projections recorded three months ago, actual and projected labour market outcomes are consistent with a continuing employment recovery," the survey said.

The survey was conducted in the week to last Friday.