ANZ's head of Australian economics,David Plank,said"fear about the near-term economic outlook is driving the weakness"and cautioned the large fall in confidence could prove a problem for the federal government's stimulus package.

NAB's closely-watched measure of the business sector showed confidence there down to its lowest level since 2013.

Both confidence and trading conditions slipped through February.

Of even greater concern,indicators of forward orders,exports and stocks of goods are now in negative territory,suggesting businesses are preparing for a big hit to their bottom lines from the virus outbreak.

"With conditions and confidence continuing to track below average – there are risks around future capital expenditure and employment growth,"NAB chief economist Alan Oster said.

Australian Council of Trade Unions secretarySally McManus urged the government to give casual workers sick leave at an industry round-table on Tuesday so they do not face a financial penalty if they had to isolate themselves due to the coronavirus.

Mr Morrison encouraged large employers to keep employees on the books even as the coronavirus bites,and support full-time,part-time and casual workers"with paid leave if they need to take time off".

Economic consultancy BIS Oxford Economics on Tuesday said it was evident China's economy was taking longer to return to normal,hurting countries heavily reliant on it,like Australia,and the broader global economy.

A month ago,BIS Oxford believed the Australian economy would be flat through the March quarter. It now believes the economy will contract by 0.3 percentage points.

The agency's chief economist,Sarah Hunter,said the hit to the Australian tourism,education,retail and manufacturing sectors was growing as the coronavirus spread across the globe.

She said at this stage the economy may avoid a second successive quarter of negative growth,but only barely.

"The risk of a recession is very real and very heightened right now,"she said.

Former treasurer and Future Fund chairman Peter Costello said"undoubtedly I think we will get a negative quarter in March". It would be just the fourth quarter of negative growth since Australia's last recession in 1991.

He warned the impact may linger.

"You've got to remember that growth rates in Australia have already been somewhat lower and so when you do get this negative effect,it can diminish all of the growth,"he said at theAustralian Financial Review business summit.

In a sign of the widening economic impact of the outbreak,Qantas announced it was reducing its capacity by almost a quarter because of the collapse in demand from customers.

The national carrier will ground eight of its A380s until mid-September,a move that suggests Qantas expects the fallout from virus to linger well into the second half of the year. Most of the cuts will affect its international routes with falls of up to 31 per cent on flights into Asia but domestic demand is also falling.