Business confidence improves across the board

The report (which was compiled prior to the federal election) claims the results reflect expectations of political change and more certainty about future political frameworks.

The business sentiment index rose to its highest level since May 2011 in August, thanks in part to the Reserve Bank's cash rate cut and a lower Australian dollar.

Business confidence rose very sharply in South Australia (up 15 points), but also picked up strongly in Queensland (up eight points), Victoria and NSW (both up seven).

The weakest improvement was in WA, where confidence rose by just three points.

Mining firms became much less pessimistic in the month, with the confidence index rising from -24 points in July, to -3 points.

According to the NAB report, it is possible that mining firms are anticipating an improvement in export activity, in line with the more optimistic data coming out of China.

But despite a lift across all industries and states, the NAB report shows that confidence is now only back to average levels.

Whether this will continue to trend favourably is hard to predict, thanks to poor labour market results and weak ‘forward indicators’, such as businesses struggling to pass on higher import costs from the lower Australian dollar.