The National Australia Bank has slashed down its economic growth forecasts for the country based on its latest survey that shows very slight increases in domestic sectors in Australia for the last six months.

According to the emailed statement of NAB, the domestic sector is still struggling to gain momentum as consumer confidence slumps further.

The political debate involving the carbon tax campaign increased the anxiety among consumers, who would rather stay at the sidelines as anxiety of higher costs for goods and services mounts.

"Activity in the domestic economy was a little stronger in June, although overall conditions remained fairly subdued suggesting the economy is still struggling to find traction following the flood-induced slowdown. Business confidence deteriorated sharply in June, with the index now in line with the relatively weak levels recorded in December (surveyed immediately following the floods).

"Conditions in retail fell to worryingly low levels (to around that of Nov 2008, just prior to the Government's initial cash handouts), while manufacturing, construction and wholesale were again poor. The high Australian dollar, continued cautiousness of households and concerns about the global outlook appear to be eroding sentiment, with weak confidence reported in construction, manufacturing, retail and wholesale. While conditions were weaker in mining, the outlook remains strong as reflected in high confidence levels," the NAB said in an emailed statement.

The weak consumer demand is also reflected in the weak orders amidst an increase in the labour costs, although the price inflation was a little softer.

The NAB said the overall the gap between weak and strong industries is reaching historical highs, which it said is similar to the 2000 slowdown.

The bank's chief economist Mr Alan Oster and his team has drawn a 1.7 percent growth in 2011 and 4.6 percent in 2012, in spite its negative implication of the carbon tax.