Aggressive interest rate cuts by the Reserve Bank of Australia in May and June have so far failed to spark much of recovery for business, with confidence weaker in June and overall trading conditions only marginally better.

National Australia Bank's business confidence index fell to -3 in June from -2 in May, while its business conditions index rose to -1 from -4 in the same period.

The RBA slashed interest rates by 50 basis points in May and by a further 25 basis points in June, moving to bolster the economy in the face of a worsening global backdrop and evidence parts of the domestic economy have stalled.

The impact of Europe's instability likely outweighed the effect of the interest rate cuts, NAB said. Business has also been preparing for the introduction of a carbon tax on July 1.

While official data has showed the job market has been solid, NAB reported some weakness in June, while the gap between booming mining states like Western Australia and states like Victoria which are more reliant on manufacturing is becoming more pronounced.

Despite the lure of lower interest rates, demand for credit weakened sharply in June, with the proportion of respondents reporting a need for credit falling to 37% in June from 53% in May, NAB said.

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