The May National Australia Bank (ASX:NAB) business survey revealed a further easing in business conditions to their weakest level since the COVID-19 pandemic, while business confidence remained broadly neutral, reflecting cautious optimism amid ongoing domestic and global challenges, according to a Tuesday report by Westpac (ASX:WBC, NZE:WBC).

The survey reaffirmed a three-year trend of weakening business conditions and fluctuating, yet broadly neutral, confidence, highlighting Australian businesses' continued focus on domestic challenges.

Business conditions slipped to their weakest level since the pandemic in May, with employment falling sharply and trading conditions softening, reflecting ongoing risks to economic recovery amid weak demand and persistent labour shortages, the report said.

Business confidence rose but remained within the typical range seen over recent years, reflecting a broadly neutral outlook, Westpac added.

Cost and price gauges improved for the inflation outlook, with purchase costs easing to 1.1%, labor costs rising slightly to 1.7%, and the overall price gauge dropping to 0.5%, the slowest pace since the pandemic.