Business confidence is at its highest level in almost a year, but it is uncertain whether the improvement will last.
NAB chief economist Alan Oster said a bounce in consumer confidence after its post-budget slump and better business conditions had given business confidence a boost.
However he said confidence outside of the construction and retail sectors was still weak.
"The composition of confidence may provide some cause for reservation about this optimism, at least in the medium term," he said.
"Soft wages growth, a rising unemployment rate and a decline in June quarter retail sales suggest that this confidence may be tested."
Business conditions were particularly strong in the construction and services sector, helped by low interest rates and a surge in apartment construction, the survey's report said.
JP Morgan economist Ben Jarman was surprised by the strong rise in business confidence.
"It cuts against the grain of the broader data, which have been losing steam since the start of the year," he said.
"Of course, surveys are supposed to be leading indicators, but we struggle to see what could have brought such a change in fortunes in July, and the finer details of the survey are not particularly instructive on this point."
Mr Jarman said the fact that most of the strength in business conditions was in home construction may mean the economic outlook will remain uncertain until other sectors, such as retail, start to pick up.
"The construction sector is prone to flighty changes in sentiment, and is also less of a bellwether for hiring and inflation trends and therefore the rates outlook," he said.
"For that reason we are cautious on today's result."
The NAB business confidence index in July rose three points to 11 points. A reading above zero indicates optimists outweigh pessimists.
NAB's business conditions index rose to eight points in July, its highest point in nearly four years, but the recovery is not expected to spark a fall in the unemployment rate.
NAB is forecasting that unemployment will peak at 6.5 per cent towards the end of 2014, after it unexpectedly spiked at 6.4 per cent in July.
NAB still predicts there will be no movement in the Reserve Bank of Australia's cash rate in 2014, but added that a chance of a rate cut is increasing.
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