Australia business activity better than feared in Q2

SYDNEY, July 28 - Australian business conditions and confidence picked up markedly last quarter from the depths seen early in the year, a survey showed on Tuesday, though firms remained cautious on the longer-term outlook.

The quarterly survey of over 900 firms from National Australia Bank <NAB.AX> echoed upbeat results already seen in its monthly surveys. The measure of business conditions rose 11 points to -9 in the three months to June, while its index of confidence climbed 20 points to -4.

The measure of expectations for business conditions over the next 12 months jumped all the way to plus 5, from a depressed -24 in the first quarter. Yet that was still a subdued result historically.

"While fears of Armageddon have evaporated, expectations for business conditions over the next 12 months are still the lowest since June 1991," noted NAB's chief economist, Alan Oster.

"Labour shedding eased somewhat, but is still significant," he added. "Suitable labour is now more available than at any time since mid 1993."

The survey's index of employment rose by 7 points to -18 in the second quarter, though more up-to-date results from the June survey showed a bigger improvement.

Capacity utilisation remained broadly unchanged at 80 percent, while firms continued to run down inventory.

Wage pressures were subdued as purchase costs and economy wide price pressures slowed sharply. Retail inflation lagged as margins were rebuilt.