Conditions best since Lehman

SYDNEY - A more positive outlook by firms about the state of the domestic economy has translated into a sharp improvement in business conditions to the strongest level in nine months, a survey shows.

The National Australia Bank (NAB) monthly business survey's measure of business conditions rose 12 index points to minus-2 points in June.

It is the highest reading since September 2008, before the collapse of global US investment bank Lehman Brothers.

Australia's benchmark share index, the ASX-200 rose 3.47 per cent yesterday led by the banking and mining sectors.

All components of the business conditions index, including trading conditions, profitability, employment, and forward orders, improved in June.

The survey's measure of business confidence rose six index points to four points, returning to positive territory for the first time in 18 months.

A reading below zero indicates pessimists outnumber optimists.

The business confidence index reached minus-30 points in early 2009, but has been on a quick upward path since global sharemarkets rallied and commodities prices increased. The business conditions had not improved at the same pace, until this month.

NAB chief economist Alan Oster said the strength in conditions was welcome news. Oster attributed the improvement to firms bringing forward capital expenditure plans to take advantage of investment allowances and consumers hitting the shops armed with their Government-generated cash handouts.

The mining sector was also upbeat thanks to a less bleak global outlook.

But Oster said business conditions could deteriorate over the second half of the year as the impact of the cash handouts started to fade.

- AAP