Business confidence in the country dropped for three straight months in May. Survey results suggested major factors affecting the economy like high interest rates and a lower Australian dollar with the European debt crisis, giving doubts of a global growth outlook.

The National Australia Bank (NAB) released its business survey today showing business confidence dropped to an index of plus-5 points last May down from 8 points in April. Business conditions also went down to plus-6 points down 2 points in April.

The survey also revealed that the capacity utilisation across the economy fell to 81.7 per cent in May, from 82.0 per cent in the same period.

NAB's Australian economics head Rob Brooker said the survey showed the Reserve Bank of Australia (RBA) might sit on the side lines until the fourth quarter of the year.

Since October 2009, the RBA has raised interest rates six times, taking the cash rate target to 4.50 per cent from three per cent.

Mr. Brooker said that the RBA's assumption- which would still grow at about its long-term average rates of close to 3 per cent in this year- was still realistic.

"There is nothing here that would be overly surprising to the RBA," Mr. Brooker said.

Mr. Brooker also said NAB conducted the survey during May 24 to May 31 which is a period that covered much of the stress in global financial markets.

The survey noted that trading and employment conditions were broadly unchanged, but profitability was weaker last month.

Conditions in mining and construction were still up, but recreation, finance and wholesale sharply dropped, as noted in the survey.

The survey revealed that business conditions were strongest in the mining, construction and transport sectors while retail was the weakest.