Now there's either no good news in the latest business confidence and conditions update from the National Australia Bank, some good news, or a big worry.

Take your pick.

The good news is that the slide in confidence and business conditions is what the Reserve Bank would be expecting, so no rate rise would be the headline.

No good news means that the slide in business conditions has a downside, but that is too early to say whether that will develop into a big worry for the economy.

And that big worry is, that thanks to the slide in retailing, building and construction (as we have seen with building approvals and housing finance this week), a serious slump is developing in the domestic economy which could end the recent strong growth in employment.

But that would be qualified good news at the Reserve Bank because it would mean the tighter labour market and higher wages it is expecting in 2011-12 might be postponed for a while, thereby taking the pressure of rate rises in early 2011.

The NAB said its July business survey showed sharp and surprising falls in both business confidence and business conditions.

It said a fall in orders was worrying that and commented that while it was difficult to base a forecast on a month's data "it is clear something important is happening".

But the dips were not universal: confidence and business conditions in the mining industry remains solid, as you'd expect it to be with huge developments, high prices and surging export volumes, especially for iron ore, coal, gas and copper. And the ending of the resource tax brawl.

But the slide in domestic sectors like retailing, building and construction won't be easy for the RBA to halt (if it wants to), without some sort of fiscal (spending, tax concessions) move from the federal government after the election.

But that will be tough as both sides in the election have pledged to cut spending and debt and return to surplus as fast as they can.

The NAB said yesterday that business confidence "surprised by weakening further".

"While the expected boost to mining, post the mining tax agreement, eventuated, it was more than offset by declining confidence in manufacturing, retail and construction."

It said that business conditions "also weakened further driven by retail and much lower construction activity (as Government stimulus passes).

"Against that, mining activity remained strong and transport improved. The main weakness was in trading and profits. Employment remained robust.

"Business conditions across industries have become even more disparate.

"Transport and utilities activity improved strongly in July.

"Other sectors to report better outcomes included wholesaling (surprisingly) and personal and recreational services.

"Mining reported much more subdued growth but activity remains robust (an index of +27).

"Manufacturing and retail reported sizeable falls in business conditions.

"The latter result was disappointing and suggests last months improvement may have been a temporary blip to an ongoing declining trend (indeed the trend index for retail at -8 points is the lowest since March 2009).

"The other noticeable move in July was a marked decline in construction (a decline of 27 points to an overall index reading of -10)."

"While care always needs to be used in interpreting monthly data, it is clear something important is happening here," the bank said in its release yesterday.

"The most likely explanation revolves around the passing of the peak in government construction spending, as well as a weaker housing construction market.

"As with the broader survey, the falls in construction were concentrated in profitability (especially) and trading - while employment edged higher.

"That suggests the falls were largely unexpected or viewed as temporary. This will clearly need to be watched.

"The falls were heavily concentrated in manufacturing, construction and retailing.

"The only sectors to report significantly positive orders were transport and agriculture.

"As a result orders are now at their lowest level since May 2009 (a similar finding as confidence).

"The fall in new orders is probably the most unsettling feature of the July Survey results. (The bank's emphasis).

"Again much will depend on whether this reading is a one off or a sign of a more serious developing trend."

It said capacity utilisation edged a touch higher to 82.3% from 82.1% last month, again emphasising the difference better current vis a vis more forward looking indicators (such as orders and confidence).

Capital expenditure also was somewhat weaker, falling 4 to +1 index points.

Overall, the survey suggests a soggy start to Q3 with demand in July slowing to around the 2.75% (annualised) mark.

The bank said its Australian forecasts edged up a touch to 3% (from 2.75%) in 2010 due to strong commodity exports in Q2 - but now weaker H2 2010 in prospect, reflecting domestic demand softness.

NAB said the survey results were consistent with this profile.

It sees economic growth in 2011 "up a touch to 3.75 (3.5½% previously)".

"Unemployment of 4.75% later this year and 4.5% by late 2011.

"Interest rates now on hold to early 2011 but peak still at 5.50% (in late 2011) - as weaker domestic economy delays onset of tightening cycle by a quarter.

"Rate to rise by around 25 points per quarter in 2011.