NAB's survey suggests confidence softened, possibly because of Malcolm Turnbull's removal as prime minister. Photo: Attila Csaszar

Business conditions strengthen in August

Tuesday, 11 September, 2018 - 15:00

Australian business conditions rebounded in August as firms reported improved sales and profits, a new survey shows.

But the latest National Australia Bank index of business conditions released on Tuesday shows confidence softened, perhaps in reaction to political uncertainty following the removal of Malcolm Turnbull as the nation's prime minister.

The index regained two points to stand at plus 15 in August, well above the long-run average of plus six.

The survey's measure of profitability climbed six points to plus 16 in August, recovering all of July's dip, while its sales index added a point to a strong plus 19.

In a promising development, the survey's employment index held firm.

"The employment index continues to suggest growth in employment of around 23,000 per month over the next six months," NAB group chief economist Alan Oster said.

"With a stabilisation in the labour force participation rate, this should be enough to see the unemployment rate decline further over the rest of 2018."

The official jobs report for August is due on Thursday and is expected to show the jobless rate stayed at a six-year low of 5.3 per cent.

The survey's often volatile measure of business confidence dipped three points to plus four in August.

The poll was taken just after the Liberal Party ousted Mr Turnbull and replaced him with Scott Morrison.

The coalition has since slumped in opinion polls, leaving the Labor Party in a commanding position to win the next election.

Still, firms reported strength in their own businesses, with forward orders rising and investment plans picking up outside the mining sector.

"In combination with a rebound in business conditions this month, this suggests that the business sector has continued to perform strongly as we enter the second half of 2018," Mr Oster said.

The Reserve Bank of Australia (RBA) has highlighted the resilience of business conditions as it forecast economic growth would top 3 per cent this year and next.