Business confidence continued to sag in the December quarter despite steady conditions, according to National Australia Bank's latest quarterly business survey.

The bank said on Wednesday that the business confidence index dropped 4 points, to 2, in the three months to the end of December, from 6 points for both preceding quarters.

"The pull-back in confidence was not surprising given the more subdued near-term outlook for the economy," NAB said. Credit:Rob Homer

This is below the long-run average, and reflects a downbeat view of growth prospects because of sluggish spending and investment and soft commodity prices, the bank said.

"The pull-back in confidence was not surprising given the more subdued near-term outlook for the economy," NAB said.