As Australia started feeling the brunt of the heavy downpours that spawned the devastating floods in the months of December and January, business confidence in the country had commenced shrinking, according to the latest Monthly Business Survey of the National Australia Bank (NAB).

Released on Wednesday, the NAB survey said that business confidence retreated by nine points to -3 in the final month of 2010 though it also showed that improvements were seen in Australia's business conditions due mostly to the rising numbers flashed by the retail sector.

The survey said that confidence dipped almost across the board in the economy and felt heavily in transport and utilities, wholesale, constructions and manufacturing, with the mining and wholesale sector experiencing the deepest slip of -24.

NAB attributed the steep fall to the "worsening January situation in Queensland mining and transport," which also pointed to the plunging "confidence in mining, transport and utilities, wholesale, construction and manufacturing."

Considering the new indicators, NAB said that the country's economic growth guidance has been downgraded to 2.4 percent, coming form the 3.6 percent set during the survey's November results.

Despite the sliding confidence of many sectors of the economy, growths were recorded in the recreation and personal services industries, with readings of +8 points while the finance and real estate sectors managed to post confidence growth of +6 points. NAB said that the national confidence reading was +1.

On the other hand, trading conditions improved to +9 points owing to better profitability and employment opportunity but the NAB survey cautioned that despite the upward swings, the economy still needs to be wary of "a particularly large seasonal adjustment to retail conditions component."

Overall, NAB pointed out that amidst the plunging confidence in most of the business sectors, the conditions in most of the industries remained positively steady as the survey stressed that "the impact of coal mine and railway closures in Queensland may not be felt in the conditions index for mining and transport and utilities until the January survey."