Confidence in the Australian economy was twice as high in January as it was in December, according to the National Australia Bank's index of business confidence.
The gauge rose to 10 in January from an upwardly revised five in December. "The latest reading was well above the long-run average as a recovery in the economy from the COVID-19 shocks gained momentum. Sentiment improved the most in recreation and personal followed by finance and business services, wholesale and manufacturing," the bank said.
In contrast, business conditions fell sharply to seven from 16 in December mainly as a result in a fall in trading, profitability and employment.
"Business started the year on a more optimistic note, even as conditions eased from the strength we saw in December," the bank's chief economist Alan Oster said. "Importantly, employment remains in positive territory - so overall businesses are still expanding their workforce."
The labor market has recovered far faster than expected in recent months with the jobless rate dropping to 6.6% in December from a peak of 7.5% in July.
"We hope to see capacity utilization rise further over the coming months as demand picks up, which should, in turn, see businesses consider expanding capacity through hiring or investing," said Oster.
The index rates the current level of business conditions in Australia. Changes in business sentiment can be an early signal of future economic activity such as spending, hiring and investment. The index is based on data collected from a survey of around 350 companies. A level above zero indicates improving conditions and below worsening conditions.
Earlier, the ANZ-Roy Morgan Consumer Confidence index was down. "The decrease this week has been driven by small falls in confidence about people's personal financial situations with fewer Australians saying they are 'better off' financially than a year ago and fewer expecting to be 'better off' financially this time next year," ANZ-Roy Morgan said.
ANZ economist David Plank said: "Consumer confidence is consolidating close to its long-run average. This solidifies the recovery from 2020. Any meaningful breakout from here on will have to be on back of strong news/developments. The vaccine rollout in Australia could be the next big trigger, with a successful program possibly propelling sentiment much higher. Of course, difficulties in providing vaccine coverage could have the opposite effect."