Australian industrial activity has grown quickly this quarter, with output and demand increasing and already strong employment levels set to progress further, a survey showed today.

The survey from Westpac and the Australian Chamber of Commerce and Industry indicated that demand and investment stayed buoyant despite rising interest rates and global financial turmoil.

The main composite index of activity went up 56.6 in the second quarter, the second highest rating since the first quarter of 2008. That was significantly better than its decade average of 52.1 and pointed to manufacturing growth at an above-trend pace.

"The index continues to imply an acceleration in annual private sector final demand growth in mid-2010 to an above-trend pace of around 5 percent a year," said Westpac senior economist Anthony Thompson.

Manufacturers' 12-month investment plans advanced considerably to above decade average levels, he added. The net balance for plant and equipment plans surged to +18 per cent, registering its highest since the fourth quarter of 2007.

The index of labour demand stayed at a robust +7 points, pointing to a speedup in employment rise to around 3 per cent annually, from May's already healthy 2.5 per cent.

Another essential feature of the survey was the re-emergence of manufacturing price pressures after a lengthened absence, said Mr Thompson. Turning positive for the first time since late 2008, the average selling prices net balance jumped to +5 per cent from -14 per cent the previous quarter.

Companies seemed more concerned on the projections for the third quarter, with the index of expectations falling to 54.8, from a record high of 64.7.