He said the last time confidence had fallen so much in a week was in the wake of the Wentworth byelection in October last year, but on that occasion the decline had only been short-lived.
“This decline could be longer-lasting as it appears to be more related to underlying economic conditions,” he said.
“If it proves to be a sustained decline then it is yet more bad news about a household sector that is already under pressure. No doubt the RBA will take note.”
NAB’s closely watched measure of business sentiment suggests it’s not just consumers wary of the economic outlook.
Measures of profitability and trading fell and are now below long-term average levels while confidence is back towards where it was in the wake of the 2014 federal budget.
The bank’s chief economist, Alan Oster, said the survey suggested conditions had “materially deteriorated” since the start of the year.
Key forward indicators are also deteriorating. Forward orders are now negative while capacity utilisation is at its lowest point since October 2016 in a development Mr Oster said may have implications for business investment and employment plans.
The retail sector continues to bear the brunt of the slowdown, with negative conditions reported for five consecutive months and little improvement expected.
Mr Oster said the December GDP result was an early insight into what was now developing.
“Following the release of the national accounts for fourth quarter 2018, which showed growth has materially slowed in the private sector, the business survey suggests that there has been little improvement in the first two quarters of the first quarter in 2019,” he said.
“This suggests some further growing risks to our outlook for business investment in 2019.”
Last week the NAB changed its call on interest rates, saying it now expects the Reserve Bank to cut twice this year because of softness in the economy caused, in part, by the fall in housing prices.
New figures from the Australian Bureau of Statistics released Tuesday continue to point to the impact of the sliding property market, with lending to owner-occupiers for homes falling another 1.3 per cent in January to be down 17.1 per cent over the past year.
Lending to property investors slipped 4.1 per cent to be down by 28.6 per cent over the past month. It is now down 45 per cent since its 2017 peak.
First time buyers are also moving out of the market with the number of loans taken out by this group falling 0.3 per cent in January and by 12.7 per cent over the past 12 months.
A separate report from S&P Global highlighted the total level of debt now held by Australian governments, businesses and households.
In a warning that global economic conditions were pointing to a new credit downturn, the agency noted world-wide debt levels are higher than when the Global Financial Crisis erupted in 2008.
The ratio of Australian household debt to GDP has reached 121 per cent, up from 109 per cent a decade ago, and the highest in the countries surveyed by S&P.
Government debt, covering all levels, has risen in Australia to 40 per cent of GDP from 9 per cent in 2008. Despite the increase, Australian government debt levels are relatively low.
Corporate debt excluding the banking sector has actually fallen to 74 per cent of GDP.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.