Business conditions in July have risen to their highest levels since early-2008, which appears to have boosted business confidence as well.
That was the conclusion reached by National Australia Bank, in its keenly-observed monthly business survey.
Last month, business conditions lifted slightly, by a point to +15. NAB noted that this is three times the long-run average (+5).
Business confidence, although "volatile", experienced a sharper increase (up 4 points in July, to +12) — double its long-run average (+6).
The only component of business conditions to improve in the quarter was "profitability".
Employment conditions remained flat (at +7), while trading and sales moderated slightly, but they remain at "very elevated levels", according to the bank's measures.
Other leading indicators were less upbeat — forward orders softened slightly and capacity utilisation remained flat.
What's behind the results?
There are some positives and negatives to be taken from the business survey.
"Business confidence has gradually been chasing business conditions higher for some time, and has likely seen some additional support this year from an improving global environment as well, although there are still some notable risks," said NAB's chief economist Alan Oster.
Professional services drove this improvement, but there was a "a renewed divergence across industries", and considerable softening in the retail and wholesale sectors.
But the bank is "optimistic" about the near-term outlook for the labour market.
"The persistent strength in employment conditions has made us a little more optimistic about the near-term outlook for the labour market," said Mr Oster.
However, he is "apprehensive" about "the disconnect between the business and consumer sectors" — particularly due to sluggish retail conditions last month.
"Every time we think the retail sector might be closing the gap with the more upbeat parts of the economy, it seems to suffer a setback.
"Retail conditions have generally improved since the lows of late last year, but the trend appears to be turning down again, with retail once again the worst performing industry in the survey."
Other leading indicators were a little less upbeat — forward orders softened slightly and capacity utilisation remained flat.
The survey noted that the persistent hurdles to economic growth (and the Reserve Bank raising interest rates) still persist.
These include high levels of underemployment and household debt, combined with looming peaks in LNG exports and housing construction.
