Business confidence in negative territory

CONFIDENCE among Australian businesses has tumbled to its lowest level in more than two years as the volatility consuming markets worldwide takes a heavy toll.

According to National Australia Bank's monthly monitor, fresh global uncertainty in August - as sharemarkets dived and Europe's debt crisis intensified - triggered the dive.

The bank's index fell from two points to minus eight points, signalling that more businesses were pessimistic than optimistic about the outlook last month.

It is the first time the business confidence trend reading has been in negative territory since April 2009, when it was minus 12.

But confidence was still well above levels recorded in the depth of the financial crisis, according to the research.

NAB's report highlighted the continuing multi-speed character of the economy, with mining and service sectors buoyant but manufacturing, retail and construction limping along.

NAB economists said the forecast for China and India was strong but weak growth was expected in developed economies.

"We cannot rule out a recession from self-fulfilling retrenchment by consumers and businesses whose confidence has been shaken, but it is too early to call that outcome and it is not our core forecast," they said.

The report said the economy was growing "a touch below trend - and nothing like as bad as during the GFC or indeed earlier this year during the Queensland floods".

The findings come as research reveals Aussie business failures have risen sharply.

While the latest Dun & Bradstreet Global Business Failures Report says Australian business collapses climbed 12 per cent in the June quarter, failures across advanced economies were down 5.7 per cent to the lowest level in four years.

The sharp increase in Australian failures has been blamed on a delayed effect from the financial crisis and the impact of the strong dollar.

Dun & Bradstreet chief executive Christine Christian said Australia joined Hungary, Ireland, Italy, Spain and Portugal with sharply rising insolvencies.