Australia's Treasurer Joe Hockey speaks during the B20 Summit in Sydney July 18, 2014.
Australia's Treasurer Joe Hockey speaks during the B20 Summit in Sydney July 18, 2014. REUTERS/William West/Pool REUTERS/William West/Pool

The Australian economy is capable of weathering difficult economic conditions but relying on interest rates alone will not help the country's financial woes. According to Lord Mervyn King, a former Bank of England governor, a slowdown in China's economy will "hurt" Australia's economic growth. However, he believes the possibility of that scenario is "unlikely."

King told the attendees of a mining conference in Kalgoorlie that Australia is "a pretty good place to be" and the outlook for Australia's resources industry continues to remain promising despite the negative short-term outlook suggested by others.

King said low interest rates support equity and commodity markets, but uncertain geopolitical environment will boost commodity prices. Australia's government debt is one of the greatest challenges the country will ever have since it is dependent on resources.

Meanwhile, business confidence in Australia climbs to its 11-year high as retail and services sectors grow more optimistic about their future sales. About 46 per cent of businesses in Australia expect to see higher sales in the December quarter, while only 9 per cent predict a decline, according to the recent Dun and Bradstreet's Business Expectations survey.

The poll revealed that the services sector is the most optimistic about sales in the holiday season, followed by utilities, transportation and construction industries.

Dun and Bradstreet Chief Executive Gareth Jones said business confidence has steadily improved in Australia since the end of 2013. While profits and capital investment indicators have pulled back, a clear upward trend is developing in 2014.

Economist Stephen Koukoulas said the high level of business confidence will help boost the economy later in the year. Employment outlook continues to be resilient as the pace of job creation may soon lower the unemployment rate in the future, according to Koukoulas.

The recent survey found that two out of three businesses were more positive about a high economic growth in the months ahead, but not all areas of the country have the same view. In Western Australia, more than half of businesses think Australia's economic conditions are "average."