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Business confidence improves in December

Australian business confidence rebounded in December following an interest rate cut and positive developments in the US and China.

National Australia Bank's monthly business survey, released on Tuesday, showed business confidence rose 12 points in December to an index reading of plus three.

The result came after the business confidence index fell to minus nine, its lowest level since April 2009, in November.

NAB said confidence had been boosted by an interest rate cut in early December, along with a last minute deal among US politicians to avert a `fiscal cliff' of tax hikes and spending cuts and signs of improvement in the Chinese economy.

The Reserve Bank of Australia cut the cash rate a quarter of a percentage point to three per cent in December.

But NAB said confidence still remained below its long-run average index reading of plus five and cautioned the December result may not be repeated in early 2013.

"Whether this feeling of relative optimism will be sustained into the new year remains to be seen," NAB said in a statement.

The improvement in confidence came despite continued weakness in business conditions, which rose two points to an index level of minus four points.

NAB said conditions were weakest in wholesale, manufacturing, retail and construction but were relatively favourable in transport and utilities and recreation and personal services.

It said conditions deteriorated in South Australia and Western Australia in December but strengthened in Queensland.

Confidence was strongest in Western Australia, Queensland and New South Wales and in the transport and utilities and finance sectors.