Business confidence rises to match seven-year high

SYDNEY - Australian business confidence increased last month for a second month, adding to signs the economy is robust enough to weather higher interest rates.

The confidence index gained 4 points to 19, matching November's seven-year high, according to a National Australia Bank survey of 580 companies between February 22 and February 26 released in Sydney yesterday.

The bank's business conditions gauge, a measure of hiring, sales and profits, rose five points to eight.

Business sentiment is strengthening amid a surge in Asian demand for Australian natural resources such as iron ore, increasing scope for Governor Glenn Stevens to raise the central bank's benchmark rate next month for the fifth time in six meetings.

"There still appears to be considerable momentum in the domestic economy, with forward orders strengthening and high levels of business confidence," said Alan Oster, chief economist at National Australia in Melbourne.

The Australian dollar rose to US91.01ci n Sydney from US90.93c just before the report was released.

The two-year government bond yield gained 1 basis point to 4.74 per cent. A basis point is 0.01 percentage point.

Governor Stevens will increase Australia's overnight cash rate target by a quarter percentage point in May, August and November, taking the rate to 4.75 per cent, Oster said.

Policy makers boosted the rate by a quarter-point last week and in December, November and October last year.

Stevens, the first Group of 20 central banker to raise rates this year, said last week that Australia's economy was running at or near "trend" after skirting last year's global recession.

Gross domestic product grew last quarter at the fastest pace in almost two years, rising 0.9 per cent.

- BLOOMBERG