A survey by the National Australia Bank showed that business confidence in Australia dropped 10 points to minus eight in August.

The results, released Tuesday, did not surprise observers since the survey was made in the last week of August amid high global uncertainty, extremely volatile stock markets and fears of a spreading European debt contagion.

The NAB's July survey registered a business confidence level of 2, which makes the August level the lowest on record since April 2009, right after the global financial crisis of 2008.

The long-term average of business confidence in Australia is 6.

"The weakness in confidence in the month suggests that businesses are wary about the potential impact of global influences on activity within their own business," NAB chief economist Alan Oster said.

Alongside business confidence, business conditions also slid down 2 points to minus 3, which is a second straight month of contraction.

August saw tumbling share markets across the world after Standard & Poor's downgraded the U.S. credit rating to AA+ from AAA because of the delayed action of Washington on raising the country's debt limit.

"The recent run of softer local economic data and the uncertain path for domestic interest rates are also likely to have influenced the weaker confidence outcome in the month," News.com.au quoted NAB economists.

But not all sectors were weak. Australia's mining and service sectors continued to remain generally strong, while manufacturing conditions plummeted sharply in August. Mining logged employment conditions of 26 points, transportation and utilities 10 points and manufacturing negative 18.

"This supports the notion that the Australian economy is undergoing a structural transformation, and the speed of employment changes in different industries will test the capacity of the economy to absorb this restructuring," Oster said.

NAB said that because of the substantial drop in business confidence, the Reserve Bank of Australia will likely keep the cash rate steady at 4.75 per cent and forecast a likely 25 basis point increase by middle of 2012.