Key Points:

Australian company profits advanced in the second quarter as rising commodity prices stoked miners' earnings and increased consumer spending boosted incomes for banks and retailers.

Gross operating profits climbed 1.4 per cent from the first quarter, the Bureau of Statistics said in Sydney yesterday. That compared with the median estimate of a 2 per cent gain in a Bloomberg News survey of 20 economists. It marked the ninth consecutive quarter of earnings growth, the longest winning run since the series began in 1994.

Higher profits may encourage businesses to expand and hire more workers, signalling Australia's 16 years of economic growth will be extended even amid global market turmoil sparked by the US housing slump.

"Further profit growth should provide reassurance that Australia's business sector was well placed as it entered this current period of market instability," said Riki Polygenis, senior economist at ANZ Bank in Melbourne.

Inventories held by Australian companies rose a less-than-expected 0.4 per cent in the second quarter, yesterday's report showed. Economists had estimated a 1 per cent gain.

That prompted some analysts to cut their estimates of gross domestic product growth in the second quarter.

"Inventories are rising at a slower rate and will subtract more from GDP," said Andrew Hanlan, senior economist at Westpac in Sydney. He lowered Westpac's GDP prediction to 0.5 per cent from 0.7 per cent.

Australia's economic expansion probably slowed to 0.6 per cent in the second quarter as residential construction work declined and exports eased, according to a Bloomberg News survey of economists on August 31. The growth report will be released in Sydney today.

The figures also showed profits for miners climbed 3.7 per cent from the first quarter. Earnings at retailers rose 2.9 per cent and income for companies that provide business and property services increased 6.1 per cent.

BHP Billiton and Zinifex are among Australian miners reporting record profits as global demand, led by China and India, drives up the prices of raw materials such as iron ore, zinc and coal.

Zinifex, the world's third-largest zinc miner, said full-year profit increased to a record as prices rose for the metal used to galvanise steel.

BHP Billiton, the world's largest miner, reported an eighth consecutive record profit. The average cash price for nickel, used in stainless steel, more than doubled in the half, and copper, used in pipes and wires, rose 12 per cent.

Confidence among Australian consumers is close to a record high, buoyed by rising wages and employment. Domestic demand is stoking earnings for banks and retailers.

Woolworths, Australia's biggest retailer, lifted second-half profit 27 per cent to A$598.4 million ($699.5 million) in the six months ended June 30.

Australia's jobless rate has fallen to a 33-year low of 4.3 per cent. Employers hired 250,000 extra workers in the 12 months to July 31. The wage-price index gained 1.1 per cent in the second quarter, equalling the strongest increase since the series began in 1997.

Gross operating profit measures earnings before tax, interest, depreciation and amortisation. It excludes asset sales and foreign exchange gains or losses.