Some of Australia’s largest companies recorded strong business conditions but their confidence is weaker than the broader economy, according to a new survey.

National Australia Bank’s (NAB) ASX 300 business confidence survey found that business conditions for large corporates was at +13 points and is stronger in comparison to -3 points for the broader economy.

In contrast, business confidence was +6 points, compared with +10 points recorded in the quarterly business survey (QBS).

Spiro Pappas, NAB head of institutional banking, said the results indicate many of Australia’s largest companies are concerned about rising labour costs and purchase costs, which is affecting their confidence levels.

In the survey, almost 60 per cent of large corporates identified sales and orders as the major output constraint.

But business confidence is strongly positive in mining in contrast to the broader economy while retail and manufacturing was the most negative, which have been impacted by the strength of the Australian dollar and relatively weak consumer confidence.

“The multi-speed economy has been commented on a lot recently, and these results are backing up the concerns raised,” Pappas said.

Large corporates recorded stronger trading and profit conditions than their smaller counterparts, with corporates at +11 and +16 respectively compared to negative territory in the QBS.

“We saw a decline in sales margins, however the impact on profitability was muted which indicates that we’re seeing high levels of discounting with many businesses aiming for volume-driven profits. We’re not anticipating the level of discounting to change over the coming quarter,” Pappas said.

Evidence of discounting by large retailers is clearly apparent in the survey, with the ASX firms reporting a -0.8 per cent change in retail prices over the March quarter, while retailers in the QBS recorded a modest -0.1 per cent.

At an aggregated level, Australian large corporates expect the exchange rate to the US dollar to weaken over the next six months to 99 cents. By industry, many large corporates in the construction and retailing sectors expect the strongest outcome for the dollar, with US$1.03 and US$1.01 respectively, while Wholesalers expect the softest outcome at $0.98.

In terms of expectations, ASX 300 companies also expect to perform better than smaller peers recording a net balance of +37 points for the first quarter of 2010, compared with +28 points in the QBS.

The survey sampled the top 300 companies listed on the ASX. It saw 90 companies respond from across the retail, manufacturing, mining and business professional services industry. Out of the 90 respondents, there were eight Australian retailers.