Data to show recession impact on consumers

A slump in consumer and business confidence is expected to be confirmed in coming days .
A slump in consumer and business confidence is expected to be confirmed in coming days .

A slump in consumer and business confidence could be confirmed in coming days after confirmation last week the Australian economy is in recession for the first time since the early 1990s.

Treasurer Josh Frydenberg has described the situation, which has put more than a million people out of work with the likelihood that another 400,000 will join the dole queue by the end of the year, as "devastating".

The economy shrunk by an unprecedented seven per cent in the June quarter, marking the second consecutive quarter of negative growth necessary to confirm Australia is in recession.

The weekly ANZ-Roy Morgan consumer confidence gauge is due on Tuesday and the monthly Westpac-Melbourne Institute consumer sentiment survey will be released on Wednesday.

Consumer confidence is a pointer to future household spending.

National Australia Bank's monthly business survey is also released on Tuesday, which economists expect will show a further drop in confidence as a result of Victoria's harsh COVID-19 restrictions.

With Victoria accounting for around 25 per cent of national output, some economists are concerned the recovery from the recession could be delayed.

This has put added pressure on Mr Frydenberg, who is due to hand down his delayed 2020/21 federal budget on October 6.

Mr Frydenberg has already flagged the government may bring forward already legislated personal income tax to help fuel spending.

But business groups and economists believe he will need to do a lot more to stimulate the economy.

Market Economics managing director Stephen Koukoulas said the Reserve Bank of Australia is already setting interest rates at effectively zero.

"We have just got throw the kitchen sink at the economy to keep people employed, to keep businesses open," he told Sky News on Sunday.

The Business Council of Australia wants a 20 per cent investment allowance for all businesses, which it calculates will cost the budget $10 billion a year.

"It is about getting business investing again," the council's chief executive Jennifer Westacott told ABC television's Insiders program.

"Business investment has been woeful. It is in free fall."

She hasn't given up on a cut in the corporate tax cuts for big business.

"We've now got a bizarre 2-tier tax system," she said.

"At some point, some government in the future is going to have to deal with this."

Businesses with a turnover of less than $50 million are tracking towards a tax rate of 25 per cent, but larger businesses are stuck at 30 per cent.

In the meantime, Australian shares look set to extend Friday's hefty fall with the futures market pointing to a 0.6 per cent decline on Monday.

The local market will get little help from US markets, which fell again on Friday night and ahead of Monday's US Labor Day holiday.

The Dow Jones Industrial Average fell 0.6 per cent to 28,133.31, the S&P 500 lost 0.8 per cent to 3426.93, and the Nasdaq Composite dropped 1.3 per cent to 11,313.13.

The Australian share market tumbled over three per cent on Friday, its biggest drop since the start of May.

The S&P/ASX200 benchmark index closed down 187.1 points to 5925.5 points.

Australian Associated Press