April 14, 2015 / 1:32 AM / 5 years ago

Australia business conditions, confidence improve in March

SYDNEY, April 14 (Reuters) - Australian businesses reported a marked improvement in conditions in March as a pick-up in sales and profitability gave firms the confidence to pump up plans for capital investment, a survey showed on Tuesday.

National Australia Bank’s monthly survey of more than 400 firms showed its index of business conditions rose four points to +6 in March, above its long run average of +4.

That helped lift confidence by three points to +3, so reversing all of February’s downturn.

The pick-up would be a relief to the Reserve Bank of Australia (RBA) which cut rates to record lows of 2.25 percent in February aiming in part to revive “animal spirits” in the business community.

“Business conditions recorded a notable lift, with each component - trading, profit, employment - posting an improvement,” said NAB’s chief economist Alan Oster. “If maintained it could well boost confidence further.”

The survey’s measure of sales jumped 5 points in March to stand at +10, while profitability climbed six points to +8 and employment edged up a point to 0.

Among sectors, wholesale recorded a sharp improvement in March while construction continued to benefit from low interest rates and a strong housing market.

The survey also found a marked rise in confidence among miners, a surprising development given sliding resource prices.

Another promising result was a healthy 5 point increase in the survey’s measure of capital spending plans to +9, the highest reading since 2011.

Policy makers have been particularly keen to see a revival in business investment given the mining sector is scaling back sharply after a decade of booming spending.

Financial markets are wagering the RBA will have to cut at least once more to support the economy. Interbank futures <0#YIB:> imply around a 60 percent chance of an easing in May, rising to almost 100 percent by June.

“We still see another rate cut in coming months - most likely May - but could be delayed if the non mining economy recovery becomes more entrenched,” said Oster. (Reporting by Wayne Cole; Editing by Jacqueline Wong)

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