The emergence of Malcolm Turnbull as Australia's fourth prime minister in just over two years should boost business confidence in the short term, but bigger challenges will persist unless he pursues economic reform, according to economists.

They say Mr Turnbull's business experience and sharp communication skills should be good for sentiment, as will the removal of the unpopular Joe Hockey as Treasurer.

​However, pushing a new broom through the ministerial team does not sweep away Australia's challenges of sluggish domestic growth, global uncertainty, China's slowdown, the budget deficit and falling living standards as the mining infrastructure boom fades into history, they say.

"A multi-year period of strong growth supported by commodity related investment and exports has come to an end," said Moody's Investors Service's Associate Managing Director Atsi Sheth.

"It is not yet clear to what extent Australia's still competitive and flexible economy can develop sources of growth that offset the impact of weaker demand from China.

"Without a return to strong growth, fiscal goals will be harder to meet.

"Therefore, while leadership challenges are part of the process of democracy, if political uncertainty leads to economic policy uncertainty or dampens business sentiment, it would add to the challenges facing the Australian economy," he said.

Treasurer trouble

This view is echoed by Royal Bank of Canada's head of economics and fixed income strategy for Australia, Su-Lin Ong, who on Tuesday said she expected a "boost to business confidence, which remains below its long-run trend and has struggled to maintain momentum in recent years".

"We are mindful that the global economy has faced numerous challenges during this period, but we have long argued that confidence is structurally weaker due to the lack of strong national leadership, little focus on much-needed reform to boost long-run growth, and the lack of a clear economic narrative," she said.

"The early rhetoric from Turnbull in his leadership bid and first press conference has put the economy front and centre," she said, while adding that "a key weakness on both sides of politics has been the Treasurer".

Gloomy mood

The economists' comments came as the latest ANZ/Morgan Stanley consumer sentiment survey found Australians in a gloomy mood before this week's upheaval in Canberra, with the headline index rating dropping 1.3 per cent last week, after a sharp 5.8 per cent decline the week before.

Most worrying was respondents' views about economic conditions over the next five years, which dropped 6 index points to minus 3, the weakest result since August 2008.

"Australians are more pessimistic about the economic outlook than at the height of the global financial crisis in October 2008," said ANZ's chief economist Warren Hogan.

Although recent market turmoil has unnerved consumers, they have long been unhappy with the management of the Australian economy.

Real reform

Mr Turnbull is likely to name Scott Morrison, current social services minister, as Treasurer as part of a dramatic cabinet reshuffle. The new-look line-up, coupled with Turnbull's promise of more consultation and a more "liberal" approach to policy, augurs well for confidence and could lead to real reform, according to UBS economist Scott Haslem.

"We believe a Turnbull-led Government may be more prepared to consider issues of tax reform, including raising the GST and reform to superannuation benefits," he said.

However, he agreed that Australia's challenges haven't disappeared with the dethronement of Tony Abbott, nor the difficulty of pushing tough policy through both houses of parliament.

"While [Mr Turnbull] has vowed to explain to the community the opportunities and challenges Australia faces, we think the task remains difficult, given what we believe is likely to remain a relatively partisan political environment," he said.

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