SYDNEY--Australian private sector business activity posted its fourth expansion in five months in August, the strength coming despite higher interest rates and the threat of a further supply shock stemming from the Middle East war.

The headline seasonally adjusted S&P Global flash Australia PMI composite output index posted 52.5 in August. Although down slightly from 53.2 in July, the latest reading marked a three-month period of uninterrupted growth in private sector output.

"Despite the challenging backdrop, the Australian private sector economy continued to signal an expansion in August, supported by another improvement in order books," said Eleanor Dennison, economist at S&P Global Market Intelligence.

"With modest growth in output, new orders and employment signalled, business sentiment among firms improved to its strongest in six months," she added.

The solid data comes as the Reserve Bank of Australia warns that further interest-rate increases can't be ruled out.

RBA Deputy Governor Andrew Hauser said this week that inflation is "too high" and a weakening in aggregate demand growth was likely to be needed to get price pressures down.

The expansion in business activity in August was concentrated in the service sector amid a slight dip in manufacturing output, the data showed.

Growth in overall new orders was broad-based by sector, however. After having softened in successive months from April's recent high, cost pressures picked up in August, it said.