Confidence in the Australian economy has been sideswiped by ongoing lockdowns, flattening business conditions in the nation's most populous states.
National Australia Bank's monthly business survey has revealed a 19 index point plummet in its business confidence index to minus eight, while the economic damage sparked by the Delta outbreak damaged the conditions index, which fell 14 points to 11.
Greater Sydney's virus woes fuelled most of the economic deterioration, with the nation's largest business bank recording big slumps in trading, profitability and employment.
Discretionary spending industries such as hospitality and tourism took the biggest tumbles, while property and finance remained the most optimistic.
NAB chief economist Alan Oster said the index only showed a snapshot from July 20 to July 30, but warned both economic indicators were set to worsen due to the extension of the NSW lockdown to other regions and the shutdowns of the Melbourne and south-east Queensland economies.
"Confidence took a big hit in the month with optimism collapsing on the back of ongoing restrictions," Mr Oster said.
"However, we know that once restrictions are removed ... the economy has tended to rebound relatively quickly."
The hit to businesses comes after a stoush on Monday between the Senate crossbench and Labor, after the opposition voted down an amendment which would have forced the federal government to reveal which companies rorted JobKeeper.
Independent senator Rex Patrick's amendment was tagged onto a COVID-19 assistance bill, and Labor finance spokeswoman Katy Gallagher said the party would not frustrate a package that is designed to give emergency funding to virus-stricken businesses.
"The figures released today highlight what we already knew to be the case: that businesses are struggling to make ends meet and wondering how they'll keep their doors open while future lockdowns remain imminent due to Scott Morrison's failed vaccination rollout," Senator Gallagher told The Canberra Times.
NAB's central forecast is GDP contracting in the third quarter.
EY senior economist Johnathan McMenamin said business were likely to act more cautiously while lockdowns disrupted trading conditions and were likely to spill over into other states and territories.
"As long as lockdowns persist and the threat of the Delta variant remains, businesses are likely to act more cautiously, holding back on both new hires and investments," he said.
Mr Oster from NAB noted forward orders remained weak and would impact employment levels and hours worked if they remained subdued for an extended period.
"If it stays at these sort of levels, and continues to go down, which is what I think will happen, that affects people's incentive to invest and to employ," he said.
"I think the big hit is going to be on hours worked, rather than employment per se ... we might expect unemployment to bounce up [to the] 5 to 5.5 per cent range, but the hours worked and the underemployment will be much [harder] hit."
The next update on Australia's unemployment figures is scheduled to be released on August 19.
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