SYDNEY - Australian companies are still largely confident about future business conditions despite higher interest rates, the drought and slowing domestic demand.
National Australia Bank's (NAB) business confidence index rose two points to four index points for the March quarter, slightly below average historic levels.
NAB head ofAustralian economics Jeff Oughton said the results were surprisingly steady.
"Confidence of the majority of businesses has remained reasonable during the past few months," he said.
"This is a surprising result, considering a slowdown in domestic demand, a severe drought, rising costs and higher interest rates."
The quarterly survey found that confidence is slightly higher among small to medium sized enterprises (SMEs) with annual sales turnover between A$2 million ($2.2 million) to A$3 million, but it was slightly lower among SMEs with annual sales between A$3 million and A$5 million.
The survey showed that SMEs in the mining and construction sectors are the most optimistic and those in agribusinesses expect a deterioration in business conditions in the March quarter due to the drought.
Some sectors of retailing and property services share this sentiment, but to a lesser extent, the survey found.
Reflecting the overall positive outlook, demand for credit is relatively strong, NAB head of business and private banking, George Frazis, said.
"Apart from working capital requirements, the key drivers remain high levels of new investment in plant and property."
Frazis said construction and property developers, and accounting services, were expected to be the best performing sectors, although some parts of agriculture would struggle with continued poor seasonal conditions.
Transport and storage, residential construction and parts of retailing and personal services have also been negatively affected by a slowdown in domestic demand, Frazis said.
