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AUSTRALIA'S small and medium enterprises (SMEs) are experiencing the strongest business conditions for more than a decade, according to a newa quarterly business index.
The August Sensis Busiess Index found business confidence rose 6 per cent during the quarter, to its highest level since the index started 11 years ago.
A total of 67 per cent of respondents are now positive about their trading outlook.
Index author Christena Singh said most expectations for the coming quarter also showed significant improvement.
"Business confidence is 6 percentage points higher than it was at the same time last year, which at that time was a historically high level for the index," Mrs Singh said.
Employment was robust with 3 per cent of SMEs increasing their workforce during the quarter, following flat growth in the previous quarter.
Employment was now 3 percentage points higher than at the same time last year, she said.
The index shows a wide variation in employment among the states. New South Wales recorded the best result, with 10 per cent growth, and Victorian SMEs recorded the weakest, at negative 5 per cent.
Expectations had risen for the coming quarter, with 12 per cent of SMEs expecting increase employment during the August to Otober period, Mrs Singh said.
"Seven per cent of SMEs reported an increase in capital expenditure during the quarter, compared with 1 per cent last quarter," she said.
"And capital expenditure has not been at a stronger level over the past five years."
Profitability plateaued during the quarter, remaining at 11 per cent, up marginally from this time last year.
Other key findings, of the index, were that SMEs' attitudes towards the Federal Government's policies improved solidly during the quarter, rising from negative 6 to negative 2 per cent - the highest approval rating for more than five years.