Business confidence rises as Middle East worries ease

Business confidence in June rises to net 37 percent optimism from 10 percent in May - ANZ survey

Own activity measure gains 11 points to net 37 percent

Firms expect higher profits, and to invest, export and employ more

Inflation expectations ease further to 3.36 percent

Fewer firms expect higher costs or to raise prices

Business confidence continues to improve as firms worry less about the Middle East conflict and the oil shock, and look ahead to improved sales and profits.

ANZ's monthly survey showed a net optimism level of 37 percent, compared with 10 percent in May, while the closely followed own activity measure lifted 11 points to 37 percent.

ANZ chief economist Sharon Zollner said most responses were received before the US-Iran ceasefire agreement and the subsequent slide in oil prices.

"While headwinds persist, this month's survey offers hope that firms and the broader economy can to some extent pick up where they left off before the oil price spike," she said.

Zollner said firms seemed more optimistic about the outlook and showed a greater appetite to invest and employ, although the initial oil shock hit to confidence was still working its way through the economy, and inflation would still be higher.

However, inflation expectations eased to 3.36 percent from 3.63 percent in May, and fewer firms expected to face higher costs, with those planning to raise prices at the lowest level in seven months.

Manufacturing was the most upbeat sector, followed by retail, with services the least optimistic.

Respondents were asked for their biggest problems, and overall higher costs, apart from wages, were a bigger problem, with less concern about finding skilled staff - although individual sectors worried about regulation and competition.

Zollner said the Reserve Bank would likely pay attention to the survey ahead of next week's cash rate decision, which she expects to be a rate rise.

"The [Monetary Policy] Committee will be feeling their way carefully through coming months as they assess both the capacity of the economy to bounce back, and the persistence of the initial oil price cost shock now that oil prices have dropped sharply," she said.