Treasurer Josh Frydenberg concedes these are trying times for the economy and the Australian community, but he expects the nation will bounce because it has done it before.
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Two new reports released on Tuesday showed confidence is tanking faced with multiple lockdowns across the country in recent weeks, hundreds of new virus cases being reported daily and the death toll slowly rising.
There was also a sharp decline in business conditions, adding to expectations the economy will contract in the September quarter, bringing the strong recovery from last year's recession to an abrupt halt.
"With people across Queensland, Victoria and New South Wales in lockdown, this is having an impact on economic activity, this is having an impact on business and consumer confidence," Mr Frydenberg told parliament.
"We know that the Australian economy has underlying strength and we know that it will bounce back from these challenges that it faces today. That is because it has done it before."
But shadow treasurer Jim Chalmers noted nobody in intensive care in NSW has had two jabs of a coronavirus vaccine.
"That really brings it home, I think, to Australians how important vaccinations are and how costly the prime minister's bungling of that vaccine rollout is - causing these lockdowns, all of this economic carnage, all of this social dislocation," Dr Chalmers told the Nine Network.
The National Australia Bank's monthly survey showed its business confidence index tumbled 19 points to minus eight in July, the second largest fall since the 2008-2009 global financial crisis.
"NSW declined by a very large 27 points on the back of ongoing uncertainty about how quickly the outbreak could be contained," NAB chief economist Alan Oster said.
"That said, confidence was softer everywhere with uncertainty over the spread of the virus in the other states and border closures."
Similarly, business conditions fell 14 points to an index of 11 in July, the third largest monthly fall since the series began in 1997, and extending the nine point drop in June.
However, despite two large consecutive falls, conditions remain around twice their long-run average, reflecting the very high levels reached earlier in 2021.
Index components were all weak, with trading down 20 points, profitability off 19 points and employment eight points lower.
Forward orders also fell by 21 points, pointing to ongoing weakness in conditions in the near term, while a fading pipeline of work may see businesses pull back on hiring and investment intentions, Mr Oster said.
The weekly ANZ-Roy Morgan consumer confidence index also took a hit, dropping 3.1 per cent to 98.6, a level not seen since November last year when Victoria ended its second long lockdown.
A level below 100 indicates there are now more pessimists than optimists, a further worry for retailers that have already been hit by a number of lockdowns across the nation.
"Our research suggests we can't be sure the low in confidence in the current cycle has been reached until COVID case numbers start to trend lower," ANZ head of Australian economics David Plank said.
Australian Associated Press
