Australian businesses believe the economy will look a whole lot better by the end of 2017

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Australian businesses confidence is booming in mid-2017.

According to the latest Dun & Bradstreet Business Expectations Survey, firms expect sales, profits, employment, investment and selling prices to rise in the December quarter of this year, fuelled by an improvement in operating conditions seen in recent months.

“Business expectations across the key aspects of the economic outlook have bounced back solidly, pointing to a lift in economic activity into the latter part of 2017,” said Stephen Koukoulas, Dunn & Bradstreet economic advisor following the release of the July report.

“Also encouraging was a rise in the actual performance of the economy in the June quarter, a result that bodes well for the official GDP figures which are released in early September.”

This chart from the survey shows the improvement in both expectations and actual operating conditions during the June quarter of this year.

Source: Dun & Bradstreet

Koukoulas said the expectations reading was particularly impressive, rising to 19.4 points, more than doubling the 9.5 point average seen over the past decade.

Fitting with the improvement in both readings, expectations for sales, profits, employment growth and business investment all rose solidly in the latest survey.

Source: Dun & Bradstreet

That combination bodes well on the outlook for Australian economic growth, says Koukoulas, noting that the uptick in employment expectations, if sustained, will support incomes and therefore household spending.

However, as is the case for households, Koukoulas says there’s one major threat emerging that could snuff out the recovery in business conditions just as it’s gaining momentum: higher energy costs.

“The surging cost of utilities is of increasing concern, with Australian businesses now identifying ‘utilities and operational costs’ as the biggest barrier to business growth,” he says.

“Some 17.4% of all businesses identified this as their biggest barrier in the July survey.”

Source: Dun & Bradstreet

Higher energy costs could deliver a double-whammy to Australian businesses, increasing both operating costs and hindering the ability of households to lift consumption levels as income for discretionary spending is directed towards non-discretionary areas such as energy bills.

That’s something that will need to be watched closely, particularly in the final quarter of this year as energy bills for the September quarter hit the inboxes and mailboxes of Australian households.

NOW READ: This chart shows why higher electricity prices present a threat to Australian retailers

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