SYDNEY (Reuters) – Australian business conditions improved in July due to a rebound in employment, a survey showed on Tuesday, while cost pressures continued to ease as high interest rates worked to slow demand.

The survey from National Australia Bank (NAB) showed its index of business conditions rose 2 points to +6, just slightly below its long-run average. In contrast, the more volatile business confidence index slipped 2 points to +1.

Within the conditions measure, the index of employment bounced from 0 to +7, while sales eased to +9 from +11.

“We were concerned about the sharp decline in the employment index last month, but it jumped back to an above-average level this month suggesting the robust jobs growth in the economy is continuing for now,” said NAB Chief Economist Alan Oster.

“The fall in conditions is consistent with the slowdown in growth that has occurred, but we expect the economy to grow more quickly in the second half of the year.”

The survey found a welcome cooling in price pressures, with growth in purchase costs and product prices slowing. Inflation in product prices held at a quarterly rate of 0.7%, confirming a slowdown in June, while purchase costs grew just 1.1% in the quarter, not far from the pre-COVID pace.

Labour costs, however, jumped to a quarterly rate of 2.5%, from 1.5%, likely reflecting the increases in the minimum wage at the start of the month, according to Oster.

The Reserve Bank of Australia held interest rates steady at its August policy meeting, judging the current rate of 4.35% is restrictive enough to bring inflation back to target while preserving the employment gains.

(Reporting by Stella Qiu; Editing by Jamie Freed)