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Australia Business Index Holds at Record High in August

Australian business conditions remained buoyant at an all-time high in August, despite an interest rate hike by the central bank and increased volatility in financial markets, a private-sector survey showed on Tuesday.

The National Australia Bank's business conditions index was steady at 19, its highest reading since the survey began in 1997.

The index measures the difference between the percentage of survey respondents citing good or very good conditions and those nominating poor or very poor.

But the turbulence in equity and credit markets and the tightening in monetary policy took its toll on business confidence, with that index dipping to 10 in August from 12 in July.

The survey's measure of sales was down by a point to 26 in August, while profitability rose by two points to 20. The index of employment was steady at 10, which was still strong by historical standards.

"The clear message from the August Survey is that business conditions continue to be very strong and indeed near record levels with little real impact yet evident from recent events," said Alan Oster, Group Chief Economist at NAB.

"Capacity utilization has returned to the record level of early 2007 and new orders are trending up and have reached levels not seen since 2004."

Capacity utilization inched up to 83.5 percent -- matching the record high in July and consistent with steady demand pressures which have been building up in the economy.

The strength of business was one reason the Reserve Bank of Australia (RBA) felt able to raise interest rates to a decade last month as it struggled to restrain inflation.