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SYDNEY, Feb 12 AAP

February 12 2013, 2:03PM

Business confidence in January built on its gains made in December, helped by a rally in the local sharemarket, a private survey says.

National Australia Bank's (NAB) monthly business survey, released on Tuesday, showed business confidence rose one point in January to an index reading of plus three.

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

NAB chief economist Alan Oster said the outcome was encouraging after the strong December surge in business confidence.

"That recovery mainly reflects external factors, including the rally in global equity markets and generally better activity in China, as well as recent RBA cuts," he said.

"However confidence remains below long-run average levels."

Business conditions also improved in January, up three index points to minus two.

Mr Oster said conditions for the interest rate sensitive areas of the economy improved but mining took a heavy fall.

"As such it is hard to estimate the impact of the recent flooding in Queensland and NSW," he said.

"Early reports indicate that mining flood damage has been largely confined to the rail network supplying Gladstone, rather than the mines and ports, suggesting interruptions will only be temporary."

The Reserve Bank of Australia cut the cash rate to three per cent in December but decided against a cut at its first meeting of the year in February.

Mr Oster said the RBA will need to cut the cash rate by another three quarters of a percentage point in 2013.

He said those reductions are likely to happen in May, June and November.