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Business Confidence Drops In Australia

Australian business confidence in June plunged to its lowest level since the Sept. 11, 2001, terror attacks in the U.S., as domestic demand slowed and costs continued to rise.

SYDNEY, Australia (AP) -- Australian business confidence in June plunged to its lowest level since the Sept. 11, 2001, terror attacks in the U.S., as domestic demand slowed and costs continued to rise, according to a survey of companies released Tuesday.

National Australia Bank's monthly business index predicted a marked slowdown in Australia's economic growth, with business confidence falling to minus 9 points from minus 4 in May.

Overall business conditions fell 7 points from May to zero -- also the lowest since 2001, and 20 points lower than its peak in October 2007.

"Conditions across the non-farm business sector as a whole deteriorated unexpectedly and significantly in June," Jeff Oughton, NAB head of Australian economics, said in the report. "This slowdown in conditions appears to have further to run."

Sales were also weaker, with companies blaming lower customer confidence and higher interest rates.

Australia's Reserve Bank raised its key cash rate target in February and March, pushing it to a 12-year high of 7.25 percent.

The NAB expects the central bank to look past high inflation in the near term and remain on hold for the rest of the year, before cutting the cash rate in 2009, it said.

Employment in June fell 7 index points to minus 2 points -- the first negative monthly reading in more than six years.

"The sustained moderation in sales and profits is now negatively impacting employment significantly -- both current job gains and hiring intentions," Oughton said.

The survey also found the costs of running a business were higher. Purchase costs rose 5.2 percent during the 12 months through the end of June, with the added expenses being passed on to consumers, it said.

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