SYDNEY – Australian business confidence collapsed in July as shock from pandemic lockdowns flooded the economy.
The National Australia Bank’s business climate index fell 19 points to minus eight points in July, while the business climate index fell 14 points to 11.
Sydney, which accounts for about a third of the Australian economy, and other major cities have been re-locked to combat the spread of the Covid-19 variant delta in Australia.
ANZ Bank ANZ, -0.59% on Tuesday reported that consumer confidence fell 3.1% in the past week as the states of Victoria and Queensland joined New South Wales to keep people at home and Close shops.
The Reserve Bank of Australia has announced that the lockdowns will cause the economy to shrink in the third quarter before there is an expected recovery in the fourth quarter.
Economists say the economic outlook is very uncertain as lockdowns are expected to continue while Covid-19 vaccination rates remain low.
The borders between most states will remain closed and international borders will not open until mid-2022 at the earliest.
“The survey shows that the strength of the corporate sector declined from early to mid-2021 due to new disruptions in the economy, but has not yet deteriorated to the lows of early 2020,” said NAB chief economist Alan Oster said.
Despite two sharp declines in a row, terms and conditions remain roughly twice the long-term average, reflecting the very high levels reached in early to mid-2021.
Employment conditions also fell sharply in July, the survey found.
The extent of job losses will be crucial to how policy makers respond to the lockdown in the coming months.
Government spending has increased to support businesses and laid-off workers, but that could escalate if unemployment rises and GDP growth remains weak in the fourth quarter.