Australia's private sector is losing momentum, with business conditions "well below average" and weakening further, according to the National Australia Bank's monthly business survey.

Key points: Business confidence jumped from 0 to +7 in May following the election and indications of a looming rate cut

Business confidence jumped from 0 to +7 in May following the election and indications of a looming rate cut But business conditions fell to +1, "well below average" levels and 20 points off last year's recent peak

But business conditions fell to +1, "well below average" levels and 20 points off last year's recent peak Retail, mining, transport and utilities were the main sectors which drove the business conditions result lower

In just a month, business conditions dropped 2 points to a reading of +1 index points. But the weaker trend is more noticeable over a two-month period — with a 6-point fall since March.

From a longer-term perspective, business conditions are about 20 points below their early-2018 peak.

The retail sector, in particular, has continued to deteriorate and is "clearly in recession", NAB reported.

"This has come as no surprise given the trends in household consumption and retail sales data.

"In seasonally adjusted terms, conditions in the retail sector are now around levels last seen in the GFC [global financial crisis]."

Mining, transport and utilities were the other main sectors which drove the business conditions result lower.

Weakest conditions since 2013

The downbeat result was largely weighed down by a decline in trading (-5 points) and profitability (-4 points) in May.

However, one bright spot was employment intentions, which rebounded 2 points, following a steep fall in April.

NAB's chief economist says the business confidence rebound will probably be 'short-lived'. ( NAB )

"At current levels, and based on historical relationships, the survey suggests that employment will likely grow around 18,000 per month, over the next six months," NAB forecast.

"With ongoing strength in population growth, this rate of employment demand is unlikely to see further reductions in the unemployment rate."

"Business conditions haven't been sustainably below the current level since late 2013," said ANZ's head of Australian economics David Plank.

"All-in-all we view this as a disappointing business survey."

Confidence rebounds

Despite that, business owners experienced a surge in confidence last month —which rose sharply from a very low starting point (zero) to +7 index points (just above average).

CommSec chief economist Craig James observed that confidence hit a 10-month high, and that last month was its "biggest lift" in almost six years.

The results of this survey were based on NAB interviewing 550 private sector businesses from 14 - 24 May — with the federal election occurring right in the middle of that period (May 18).

"This probably explains the rise in business confidence, with businesses no doubt encouraged by the surprise re-election of the Morrison Government," said Ivan Colhoun, the chief economist of NAB's markets division.

He said that meant "the range of taxation measures proposed by the ALP [Australian Labor Party] would not proceed".

However, the surge in confidence might only be a one-off.

"Business confidence saw a sharp increase in the month following the federal election and a confirmation from the RBA [Reserve Bank] that rates would be cut in June," said NAB chief economist Alan Oster.

"Forward-looking indicators suggest that the bounce in confidence is likely to be short-lived and that conditions are unlikely to turn around any time soon.

"We will also continue to closely watch the employment index for a lead on any turning points in the labour market."