The National Australian Bank monthly business survey for July, taken before Melbourne's tighter restrictions were put in place, showed its confidence index tumbled 14 points. It had recovered to zero in June from minus 21 the previous month.

In contrast, business conditions rose eight points to a reading of zero for July, with trading and profitability back in positive territory and employment continuing to improve.

"While the rebound in conditions is encouraging, the fall in confidence even prior to the announcement of Stage 4 restrictions in Melbourne demonstrates that businesses will remain very cautious given the great uncertainty around the virus at the moment," NAB group chief economist Alan Oster said.

"It also highlights that the business sector will require ongoing support through the recovery phase until the economy can get back on its feet."

While conditions have improved with modest gains in both forward orders and capacity utilisation, Tuesday's survey shows both remain weak in historic terms, indicating businesses will continue to operate at a lower level than normal and with a smaller expected pipeline of work.

The decline in confidence was across all industries, led by a drop in mining. Retail and construction remain the weakest industries overall, despite more modest falls in July.

Australian Associated Press