Index adds to rate rise argument

A CLOSELY-watched index of business conditions has climbed to its highest level since 2008 in what analysts say is a development supporting the case for an interest rate rise.

But business confidence has tumbled despite strong trading conditions, National Australia Bank polling shows.

The bank’s business conditions index has clocked in one point higher for August, at positive 15.

However, its business confidence index fell seven points to a positive reading of five points – slightly below the long-term average.

The Reserve Bank would likely “proceed with extreme caution”, NAB analysts said.

NAB chief economist Alan Oster said the drop in confidence was not a major cause for concern.

NAB noted there had been improvements in labour market indicators.