Business confidence in Australia lifted in the second quarter despite softer conditions, weaker employment, and ongoing pressure on profitability, according to a survey by the National Australia Bank (NAB) published Thursday.

The NAB business confidence index ticked up 3 points to negative 1 index point, its highest level since late 2022, driven by gains in mining, finance, construction, and transport, despite continued weakness in retail and wholesale.

Meanwhile, the NAB business conditions index eased 1 point to nil as trading conditions and employment softened slightly, and profitability remained in negative territory.

Business conditions fell sharply in finance and retail, while mining saw a strong rebound alongside transport, business services, and property gains, per the report. Retail, manufacturing, and wholesale remained the weakest sectors.

Business conditions eased in New South Wales, fell slightly in Queensland and South Australia, and improved in Victoria and Western Australia, though both stayed negative. Conditions remain weakest in South Australia and Victoria, and strongest in Queensland.

Leading indicators showed modest gains with expected business conditions, forward orders, and capex plans rising, capacity utilisation falling, and output constraints easing. In contrast, labor constraints remain a minor issue by historical standards, the report added.

Cost growth remained steady with a small rise in labour costs and a slight drop in purchase costs; retail price growth slowed to its lowest since early 2021, while wage costs and margin pressures continued to weigh on business confidence.