Confidence has tanked over the fear of the Australian economy sinking into recession for the first time in more than a quarter of century, which would put jobs at risk.
But a global rating agency has warned Treasurer Scott Morrison not to sugar-coat his economic forecasts when he hands down his mid-year budget review next Monday.
New figures showed consumer confidence tumbled 4.4 per cent to its lowest level since May in response to last week's poor set of national accounts, which showed the economy contracted by 0.5 per cent in the September quarter, the first decline in five years.
Worse still, the final weekly ANZ-Roy Morgan confidence gauge for the year also found households' views of economic conditions over the next 12 month slumped 11.7 per cent.
ANZ senior economist Jo Masters said the results were not surprising, but while she believes the downturn will be only temporary, confidence could take a further hit if Thursday's labour force report is weaker than expected.
National Australia Bank Chief economist Alan Oster also expects a fair degree of "bounce-back" when the December quarter growth figures are released next March, avoiding a technical recession.
But he expects the economy will quickly resume a relatively subdued growth track, characterised by muted domestic demand.
This view is supported by NAB's latest business survey for November, released on Tuesday, which showed a declining trend in conditions.
"We are becoming increasingly concerned about the underlying momentum in the economy," Mr Oster said, who anticipates a further two interest rate cuts by the Reserve Bank next year,
Business confidence did tick up in November, but the survey was taken in November and prior to the release of the national accounts.
With the growth figures in mind, a global rating agency has warned the treasurer it won't accept unrealistic economic forecasts in his budget update.
Moody's Investors Service expects the process of narrowing the deficit will be slower than the government projected in the May budget.
"We expect slower nominal GDP growth that will translate into lower revenue for the government and with not much room for manoeuvre for spending cuts," Moody's sovereign ratings senior vice-president Marie Diron said.
However, at this stage she does not expect to downgrade Australia's triple-A rating.
Fellow credit rating agency Standard & Poor's already has its Australian rating on a negative watch.
Shadow assistant minister for Treasury Matt Thistlethwaite said it is another sombre warning for the government.
"I accept there needs to be savings made to the budget, Labor also says there needs to be additional revenue raised," he told Sky News on Tuesday.
Government frontbencher Scott Ryan said Moody's comments reinforce the need to make savings and for the parliament to pass proposed company tax cuts to lift the economy.
"Growing the economy is the single most important element of ensuring the budget deficit is addressed and comes back into balance, apart from our savings measures," Senator Ryan told Sky News.
"The problem is, Labor blocks every step we take."
Opposition finance spokesman Jim Chalmers said the government is failing the three tests it set for itself - the economy is shrinking, full-time jobs are disappearing, and the deficits are growing.
He said the government can lock in the triple-A rating and clear up their budget mess by more than $80 billion just by ditching the big business tax cut and picking up Labor's changes to negative gearing and capital gains.
"If they choose not to go down this path, they are choosing to jeopardise the AAA rating and risk higher mortgage repayments for middle Australia," Dr Chalmers told AAP.
