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SYDNEY, July 8 (Reuters) - A measure of Australian business conditions hit the highest in five months in June as a pick up in sales and profits helped firms stay confident in the wake of an unpopular federal budget.
National Australia Bank's survey of more than 400 firms showed its index of business confidence ticked up a point to +8 in June, just above the series' long-run average.
The report's index of business conditions rebounded by 3 points to +2, the highest reading since January. Its measure of sales climbed 5 points to +7, while that for profitability rose 6 points to +3.
"Business confidence recorded an unexpected increase in the month, with firms apparently shrugging off the sharp deterioration in consumer confidence that followed May's Federal budget," said NAB's chief economist, Alan Oster.
"Stronger sales are contributing to elevated confidence levels, with the survey suggesting this has encouraged firms to invest and rebuild their inventories."
Conditions improved across industries, with construction in the lead as home building gathered steam.
The Reserve Bank of Australia (RBA) has been counting on a revival in residential construction to help support the economy as a long boom in mining investment fades.
The central bank has held interest rates at a record low of 2.5 percent since last August, and is expected to keep them there for quite a few months yet.
NAB's survey suggested inflation would be no threat to the policy outlook, with firms reporting a moderation in labour costs and purchasing prices. Retail inflation also remained at low levels in June.
One area of softness was in employment, where the survey's measure dipped to -3 in June led by weakness in the mining and wholesale sectors. (Reporting by Wayne Cole; Editing by Kim Coghill)