SYDNEY - AUSTRALIAN business confidence has surged to its highest level in almost six years as expectations rise that an economic recovery is underway, a monthly survey showed on Tuesday.

Confidence rose from +10 in July to +18 in August, the highest reading since October 2003, the National Australia Bank (NAB) study found. A positive reading indicates optimists outnumber pessimists among the 405 firms surveyed.

'The further significant improvement in business confidence is quite remarkable,' NAB chief economist Alan Oster said.

'Confidence levels are now considerably above long-term average levels and indeed are at the highest level since October 2003.'

He said the gains were broad-based, with the retail, finance, manufacturing and personal services sectors particularly strong.

However, Mr Oster also sounded a note of caution, saying confidence levels risked becoming unrealistically optimistic, just as they were overly pessimistic earlier in the year.

He said NAB had raised its forecasts to show Australian economic growth staying flat in 2009 and climbing to 1.25 per cent in 2010.

Australia posted better-than-expected growth of 0.6 per cent in the three months to June, making it the world's fastest growing developed nation. -- AFP