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COVID-19

The Australian Innovation System Monitor (AIS Monitor) offers an interpretation of innovation-related data collected and published prior to the COVID-19 outbreak. As such, the impacts of the pandemic and the government measures to contain it will not show up in the data for some time. In the interim, below are key estimates and information related to the impact of COVID-19 on business activity, including innovation. The AIS Monitor content should be interpreted in this new context.

COVID-19 impact on Australian businesses

The ABS has conducted seven telephone surveys to collect impact information from businesses — the most recent from 12 August to 19 August 2020. The combined results shed light on the business impacts from March to August 2020.[2]

Operating status and modifications to operations

  • Seven in 10 businesses (73 per cent) are operating under modified conditions. Large businesses were most affected with 85 per cent of businesses employing 200 or more persons operating under modified conditions.
  • The industries most affected are Information media and telecommunications (89 per cent), Education and training (89 per cent) and Manufacturing (84 per cent).
  • The Mining industry was least affected with only 53 per cent of businesses operating under modified conditions.
  • The most common modification was the Introduction of new hygiene protocols and practices (65 per cent). This modification was implemented by 93 per cent of Health care and social assistance businesses, 85 per cent of Accommodation and food services businesses and 84 per cent of Retail trade businesses.
  • The second most common modification was Limitations to the number of people on site (57 per cent). This was implemented by 88 per cent of Accommodation and food services businesses and 83 per cent of Health care and social assistance businesses.

Revenue impact

  • More than two businesses in five of (41 per cent) reported that revenue had decreased over the last month. The industry most likely to report decreased revenue was Retail trade (56 per cent).
  • More than two in seven businesses (28 per cent) expect revenue to decrease in the next month. The industry most likely to expect decreased revenue was Wholesale trade (36 per cent).
  • More than six in ten businesses (66 per cent) reported that revenue had decreased compared to the same time last year. Revenue decreased for 73 per cent of businesses operating under modified conditions and 39 per cent of businesses operating as normal.
  • Reduced revenue most affected the Education and training industry (87 per cent) and the Accommodation and food services industry (84 per cent).
  • The Mining industry was least affected by reduced revenue, with 33 per cent of Mining businesses reporting decreased revenue over the past year.
  • One in five (20 per cent) businesses reported that their revenue had decreased by 50 per cent or more over the past year. Nine per cent of businesses reported that their revenue had decreased by 75 per cent or more.
  • Less than one in 10 of all businesses (8 per cent) reported that revenue had increased compared to the same time last year.

Operating expenses

  • More than one in five businesses (22 per cent) reported increased operating expenses over the last month. Around one in ten businesses (11 per cent) reported decreased operating expenses over the same period.
  • Medium businesses (employing 20 to 199 persons) were most likely to report increased operating expenses (28 per cent).
  • The industries most likely to report increased operating expenses were Rental, hiring and real estate services (35 per cent) and Accommodation and food services (30 per cent).

Support measures and additional funds

  • Around two businesses in five (42 per cent) accessed available business support measures. This is down from 73 per cent in May 2020.
  • More than half (53 per cent) of all medium businesses (employing 20 to 199 persons) accessed support measures. The industry with the most businesses accessing support measures was Accommodation and food services (66 per cent).
  • When support measures are no longer available, 39 per cent of businesses currently receiving support plan to defer or cancel investment plans; 33 per cent plan to change the quantity of their orders of inputs (e.g. stock or raw materials); and 32 per cent plan to reduce their workforce. Nearly one in four businesses currently receiving support (24 per cent) plan to close when support is no longer available.

Meeting financial commitments

  • More than one in three (35 per cent) businesses reported that it would be Difficult or Very difficult to meet financial commitments over the next three months. Small businesses (employing 0 to 19 persons) were most affected (35 per cent).
  • The industries having the most difficulty meeting its financial commitments were Accommodation and food services (71 per cent reporting Difficult or Very difficult) and Transport, postal and warehousing (56 per cent).

Capital Expenditure

  • More than three in four businesses (76 per cent) reported at least one factor influencing business expenditure on capital. The most significant factors were Uncertainty about the future state of the economy (59 per cent) and Expected future customer demand (40 per cent).
  • Medium sized businesses (employing 20 to 199 persons) were most likely to report at least one factor influencing their capital expenditure (81 per cent).
  • The industries most likely to report at least one factor influencing their capital expenditure were Manufacturing (91 per cent), Construction (86 per cent) and Retail trade (85 per cent).
  • Nearly one in four businesses (23 per cent) reported that they had Decreased or Cancelled their actual or planned capital expenditure. 25 per cent reported that capital expenditure had stayed the same. 12 per cent reported that they had Increased their actual or planned capital expenditure.
  • The industries most likely to decrease or cancel their capital expenditure were Accommodation and food services (40 per cent reporting Decreased or Cancelled), Electricity, gas, water and waste services (35 per cent) and Rental, hiring and real estate services (35 per cent).
  • Nearly three in 10 businesses (28 per cent) had any capital expenditure intentions over the next three months. Large businesses (employing 200 or more persons) were much more likely to report intended capital expenditure (55 per cent).
  • The most common types of intended capital expenditure were IT hardware or software (16 per cent) and Other equipment or machinery (16 per cent).
  • The industries most likely to have capital expenditure intentions were Financial and insurance services (37 per cent), Other services (35 per cent) and Construction (32 per cent).

Boosting Cash Flow for Employers measure

  • More than half of all businesses (54 per cent) have received support from the Boosting Cash Flow for Employers measure. Medium businesses (employing 20 to 199 persons) were the most likely to receive this support (63 per cent). The industry receiving the most support was Financial and insurance services (74 per cent).
  • Businesses that received a cash flow boost most commonly used it to support employees (i.e. pay wages or salaries) (61 per cent) and to pay fixed costs (56 per cent).
  • Of businesses that were aware of the measure but did not receive support, more than two in three (69 per cent) were not eligible.

Employee arrangements

  • Less than one in 10 businesses (8 per cent) reported a decrease in employees in the last month. Medium businesses (employing 20 to 199 persons) were most likely to report a decrease (21 per cent). The industry most likely to decrease employees was Administrative and support services (22 per cent).
  • Only 5 per cent of businesses expect a decrease in employees next month. Six percent of businesses expect an increase.
  • More than half of all businesses (57 per cent) made changes to employee arrangements. 53 per cent of businesses reduced the hours worked by currently employed staff, while 24 per cent reduced their total employees.
  • Large businesses were most likely to change their employee arrangements. 72 per cent of businesses employing 200 or more persons made changes to employee arrangements. 51 per cent of large businesses reduced staff hours and 41 per cent reduced total employees.
  • The industries most likely to have changed employee arrangements are Accommodation and food services (91 per cent) and Wholesale trade (81 per cent). The Mining industry is least likely to have changed employee arrangements (9 per cent).

Workforce difficulties

  • Around one in nine employing businesses (11 per cent) experienced difficulties in filling job vacancies. Medium businesses (employing 20 to 199 persons) were almost twice as likely as average (19 per cent) to experience this difficulty. The industry that experienced the most difficulty was Electricity, gas, water and waste services (29 per cent).
  • Around one in 11 employing businesses (9 per cent) experienced difficulty in meeting sufficient staffing levels with existing employees. Medium businesses (employing 20 to 199 persons) had a higher than average chance (16 per cent) of experiencing this difficulty. The industry that experienced the most difficulty was Retail trade (32 per cent).
  • Around three in 10 employing businesses (31 per cent) experienced one or more issues in negotiating work arrangements with employees. The most common reported issues were Change of work location (16 per cent). The industry that experienced the most issues was Administrative and support services (65 per cent).

Return to pre-COVID-19 business conditions

  • In order to return to pre-COVID-19 business conditions, 35 per cent of businesses required Increased or returning customer demand in addition to the relaxation of government restrictions. 29 per cent of businesses required only the relaxation of government restrictions.
  • Nearly one in three (33 per cent) businesses employing 200 or more persons required only the relaxation of government restrictions to return to pre-COVID-19 business conditions.

External advice

  • Three in five businesses (60 per cent) sought external advice in response to COVID-19.
  • More than one in two businesses (52 per cent) sought advice on Government support measures available; 45 per cent on Regulation and compliance; and 39 per cent on Health and safety.
  • Nearly one in two businesses (49 per cent) sought advice from Private organisations, (including bank, lawyer, accountants). 38 per cent sought advice from a Federal government agency and 35 per cent sought advice from a State government agency.

How businesses responded to the impacts

  • Product and process related changes, such as changing the method of delivery of products or services, including a shift to online services was reported by almost four out of 10 (38 per cent) businesses, while only one out of 10 (10 per cent) reported having introduced new products.
  • Changing the method of delivery of products or services, including a shift to online, were most commonly reported by: Accommodation and food services (66 per cent); Health care and social assistance (66 per cent); Education and training (57 per cent); Other services (57 per cent); and Information, media and telecommunications (56 per cent).
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Estimates from the IMF

  • The COVID-19 pandemic is inflicting high human and economic costs worldwide. The IMF projects the global economy to contract sharply by 4.9 per cent in 2020 a result of the pandemic, much worse than during the 2008–09 financial crisis. Australia's real GDP is expected to shrink by 4.5 per cent.
  • The unprecedented measures to contain the outbreak have inevitably led to temporary business closures, widespread restrictions on travel and mobility, financial market turmoil, an erosion of confidence and considerable uncertainty.
  • The current recession is unlike previous recessions in its effect on consumption and services output. In other recessions, like the global financial crisis, consumers drew on their reserves, which smoothed their spending and lessened the impact on consumption. In the current recession, consumption and service outputs have dropped markedly due to steep income losses and weak consumer confidence.
  • Widespread school closures in about 150 countries as of the end of May, affect close to 1.2 billion school children (nearly 70 percent of the global total). This will result in significant loss of learning, with consequences felt for years to come.[3]
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International trade statistics from the OECD

  • COVID-19 related lockdown measures hit international trade hard in the first and second quarters of 2020. Compared to the first quarter, global exports fell by 17.7 per cent and imports by 16.7 per cent. This is the largest fall since the 2009 financial crisis.
  • Monthly data shows that trade collapsed in March and April, and partially recovered in May and June.
  • Australia registered only single-digit falls in the second quarter of 2020, with exports down by 4.4 per cent and imports down by 5.6 per cent.
  • China was the only G20 economy to record export growth in the second quarter of 2020 (up by 9.1 per cent), but still recorded a fall in imports of 4.9 per cent.[4]
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Australian business innovation from the National Australia Bank

  • Business innovation in Australia — as measured by the National Australia Bank's Business Innovation Index — has fallen significantly in the wake of the COVID-19 pandemic. However, this measure fails to show how businesses are applying their ingenuity to adapt to a new world.
  • The Business Innovation Index measures innovation by the extent to which a business changes anything that allows it to do things differently, more quickly or more cost efficiently. Widespread supply-chain and cash flow disruptions, forced business closures and labour shedding has impaired businesses' ability to do things more quickly or more cost efficiently. These measures have fallen heavily, and reduced the overall Business Innovation Index for 2020.
  • However, the challenges of the COVID-19 crisis have encouraged businesses to do things differently. This measure of innovation has risen dramatically.
  • In 2020, the most innovative sectors were Recreational and personal services; Accommodation; and Cafes and restaurants. These industries reported a dramatic increase in doing things differently relative to 2019, and were the only industries to report higher innovation overall.
  • Businesses were asked to rate the extent that changes would be retained after the COVID-19 pandemic. The results suggest that many recent innovations will be longer lasting.[5]
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Impact on business and recruitment from the National Skills Commission

The National Skills Commission is conducting a survey of businesses to measure the impact of COVID-19. Data is collected on staffing changes, business impacts, actions taken by businesses in response to the pandemic, and future expectations.

Staffing expectations

  • Expectations of increased staffing levels fell in the last half of July 2020. In the week ending 31 July 2020, 14 per cent of businesses expected to increase staffing levels, compared to 21 per cent in the week ending 10 July 2020.
  • This fall was driven by staffing expectations in Victoria and New South Wales. In the week ending 10 July 2020, 18 per cent of Victorian businesses and 12 per cent of New South Wales businesses expected to increase staffing levels. In the week ending 31 July 2020, these had fallen to 10 per cent and 8 per cent respectively.
  • In the week ending 31 July 2020, 7 per cent of businesses expected to decrease staffing levels in the coming months. This is the highest level since the beginning of May.[6]
  • Businesses in Accommodation and food services were most likely to expect increased staffing levels (35 per cent in the four weeks to 26 June 2020). This is due to easing restrictions allowing many cafés and restaurants to re-open.
  • Businesses in Wholesale trade and Professional, scientific and technical services were the least likely to expect increased staffing levels (8 per cent in the four weeks to 26 June 2020).

Confidence in remaining open

  • In June 2020, the vast majority of businesses (92 per cent) were either Confident or Very confident that they would be able to stay open for the next six months.
  • Nearly three quarters (74 per cent) of businesses in Wholesale trade were Very confident of staying open, as were 71 per cent of Retail trade businesses. Just over half of businesses in Accommodation and food services were Very confident of staying open.[7]

Operation capacity

  • In the fortnight ending 31 July 2020, 52 per cent of businesses reported operating at full capacity. This has changed little over June and July 2020.
  • Nearly two in three (66 per cent) of Retail trade businesses were operating at full capacity, while less than one in three (30 per cent) of Accommodation and food services businesses were.
  • The proportion of small businesses (less than 20 staff) operating at full capacity rose from 47 per cent in June 2020 to 54 per cent in July 2020. The proportion of medium and large businesses (20 or more staff) fell in the same period from 58 per cent to 56 per cent.
  • Businesses not operating at full capacity were less optimistic about staffing levels. 80 per cent of businesses not operating at full capacity expected their staffing levels to stay the same or increase, while 94 per cent of businesses operating at full capacity expected the same.
  • Businesses not operating at full capacity were less confident about their prospects of staying open. 89 per cent of businesses not operating at full capacity were either Very confident or Somewhat confident of staying open for the next six months, compared to 96 per cent of businesses operating at full capacity.[8]

Perceived risks to staying open

  • Half of surveyed businesses (50 per cent) reported that Another COVID-19 outbreak was a risk of staying open for the next six months. 30 percent reported the risk of Employee contracting COVID-19, and 25 per cent reported the risk of Government restrictions.
  • The risk of Another COVID-19 outbreak was most reported by Accommodation and food services businesses (75 per cent).
  • The risk of Employee contracting COVID-19 was most reported by Health care and social assistance businesses (46 per cent).
  • The risk of Government restrictions was most reported by Accommodation and food services businesses (47 per cent).
  • Small businesses (less than 20 staff) were less likely than medium or large businesses (20 or more staff) to report the risks of Another COVID-19 outbreak (49 per cent for small businesses, 54 per cent for medium and large businesses) and Employee contracting COVID-19 (28 per cent for small businesses, 37 per cent for medium or large businesses).
  • Small businesses were more likely than medium or large businesses to report the risk of Government restrictions (25 per cent for small businesses, 23 per cent for medium and large businesses).[9]
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