Company confidence in Aust at highest level in two years

SYDNEY - Australian businesses are more confident about the economy than at any time in almost two years, a survey shows.

The National Australia Bank (NAB) monthly business survey's measure of confidence rose six index points to plus-10 points in July, the highest recording since August 2007.

"The improvement was ... especially noticeable in construction, wholesaling, transport and manufacturing over recent months," NAB said.

The confidence index had reached minus-30 points early this year.

Meanwhile, the survey's measure of business conditions rose three index points to plus-one point in July.

The index is determined by respondents' views on trading, profits and employment.

All three categories improved in July to levels last seen in the middle of 2008, lifting the overall business conditions index into positive territory for the first time since the start of 2008.

Forward orders were also stronger in July, particularly in manufacturing, mining and construction.

But retail and wholesale forward orders were lower in the month.

NAB chief economist Alan Oster said the high readings for business confidence and forward orders were encouraging. But he said it would be "increasingly more difficult" to maintain the current pace of improvement in both conditions and confidence.

"The survey very much points to the start of a fade in the strength of the consumer," Oster said in the report.

Oster said the impact of the Government cash handouts, the increased investment allowance for businesses and boost to the first home owner grant were already fading.

The proportion of businesses not wanting credit fell to 35 per cent in July, from 43 per cent in June.

Oster said the survey's July results "clearly points to an accelerating growth momentum" for the economy.

NAB expects gross domestic product (GDP) to be flat in 2009, having previously estimated a decline of 0.5 per cent.

The bank said GDP would rise 1.25 per cent in 2010, up from its previous forecast of a 1.0 per cent expansion.

Unemployment was now expected to peak at 7.3 per cent in late 2010, NAB said, which was better than its most recent forecast of 8 per cent.

Based on the Reserve Bank of Australia's (RBA) latest forecasts, NAB said it expected the first official interest rate rise to occur in February 2010.

- AAP