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 five telephone surveys to collect impact information from businesses — the most recent from 10 June to 17 June 2020. The combined results shed light on the business impacts from March to June 2020.
Operating status and modifications to operations
- More than seven in ten businesses (73 per cent) are operating under modified conditions. Large businesses were most effected with 90 per cent of businesses employing 200 or more persons operating under modified conditions.
- The industries most effected are Health care and social assistance (93 per cent), Accommodation and food services (89 per cent) and Retail trade (88 per cent).
- The Construction industry was least effected with only 56 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.
- 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 effected the Education and training industry (87 per cent) and the Accommodation and food services industry (84 per cent).
- The Mining industry was least effected by reduced revenue, with 33 per cent of Mining businesses reporting decreased revenue.
- One business in five (20 per cent) reported that their revenue had decreased by 50 per cent or more. 9 per cent of businesses reported that their revenue had decreased by 75 per cent or more.
- Less than one in ten of all businesses (8 per cent) reported that revenue had increased compared to the same time last year.
Support measures and additional funds
- More than seven in ten businesses (73 per cent) accessed support measures. The most popular support measures were Wage subsidies (55 per cent) and Other government support measures (38 per cent).
- The highest proportion of businesses accessing support measures was among medium sized businesses. 79 per cent of businesses employing 20 to 199 persons accessed Any support measure, 61 per cent accessed Wage subsidies and 44 per cent accessed Other government support measures.
- More than one in ten businesses (11 per cent) sought additional funds. Of these businesses, 57 per cent sought funds from a Bank or financial institution and 26 per cent sought funds from the Owners’ personal line of credit or savings.
- The highest proportion of businesses that sought additional funds was among large businesses. 15 per cent of businesses employing 200 persons or more sought additional funds. Of these businesses, 43 per cent sought funds from a Bank or financial institution and 26 per cent sought funds from Other businesses.
- 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 persons or more 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).
Expected impact of restrictions
- More than three in five businesses (63 per cent) expected to be impacted to some extent by government restrictions on trading. The industry most impacted was Accommodation and food services, with 75 per cent of businesses expecting to be impacted to a great extent, 15 per cent to a moderate extent and 3 per cent to a small extent.
- Seven in ten businesses (71 per cent) expected to be impacted to some extent by government social distancing restrictions. The industry most impacted was Transport, postal and warehousing, with 33 per cent of businesses expecting to be impacted to a great extent, 27 per cent to a moderate extent and 35 per cent to a small extent.
- Half of businesses (50 per cent) expected to be impacted to some extent by government travel restrictions. The industry most impacted was Information media and telecommunications, with 68 per cent of businesses expecting to be impacted to a great extent, 23 per cent to a moderate extent and 4 per cent to a small extent.
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 businesses employing 200 or more persons (33 per cent) required only the relaxation of government restrictions to return to pre-COVID-19 business conditions.
- Three in five businesses (60 per cent) sought external advice in response to COVID-19.
- Medium sized businesses were most likely to have sought external advice. 72 per cent of businesses employing 20 to 199 persons sought advice.
- The industries most likely to seek external advice were Health care and social assistance (86 per cent), Arts and recreation services (80 per cent) and Education and training (75 per cent).
- 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 ten (38 per cent) businesses, while only one out of ten (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).
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.
Initial impact evaluation from the OECD
- The initial direct impact of the shutdowns could be a decline in the level of output of between one fifth to one quarter in many economies, with consumer expenditure potentially dropping by around one third. The majority of this drop comes from the decline of output in retail and wholesale trade, and in professional and real estate services.
- Activities involving travel and direct contact between consumers and service providers are adversely affected by restrictions on movement and social distancing. Most retailers, restaurants and cinemas have also closed, although some businesses are switching to takeaway sales and online sales.
- Non-essential construction work is also being adversely affected, either because of disruptions to labour availability or because of temporary investment cuts. Complete shutdowns are experienced in transport equipment, often because of difficulties in obtaining necessary inputs from suppliers in other countries.
- Shop closures and travel restrictions will probably see some discretionary spending being cut back completely, such as on clothing, footwear, household furnishings and package holidays. Sharp declines are likely in spending on local travel, restaurants, hotels and recreational services.
- Countries with relatively sizeable agricultural and mining sectors, including oil production, may experience smaller initial effects from containment measures, although output will be subsequently hit by reduced global commodity demand.
International trade outlook from the OECD
- Covid-19 related lockdown measures hit international trade hard in March 2020, with evidence emerging of a sharp deterioration in April as demand stalled and supply chains continued to be disrupted. Travel and transport services, in particular, collapsed.
- Australia's exports picked up in March (10.3 per cent) due to a rebound in demand for metal ores and minerals from Asian partners (following significant contractions in January and February) but imports continued to fall and are down over 15 per cent since December 2019.
- Travel collapsed in March across all economies in the wake of lockdown measures, with Australian exports contracting by 20.3 per cent.
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.
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.
Recent staffing changes
- In May 2020, 20 per cent of Australian businesses reported that they had decreased staffing levels in the past month. By comparison, in April 2020, 32 per cent of Australian businesses reported that they had decreased staffing levels since the onset of the pandemic.
- In May 2020, a significantly higher proportion of 15 per cent of businesses expected to increase staffing levels and 4 per cent of businesses expected to decrease staffing levels. Of the businesses expecting to increase staff numbers, many were planning to reinstate staff who were previously let go or stood down.
- In April 2020, restrictions and social distancing were in full effect. This had a significant effect on Services industries, with 36 per cent of Services businesses decreasing staffing levels and 27 per cent reducing staff hours. When restrictions began to ease in May 2020, the effect on Services industries eased too, with 20 per cent of Services businesses reducing staffing levels and 25 per cent reducing staff hours.
- Restrictions had a lighter effect on Producing industries. In April 2020, 23 per cent of Producing businesses decreased staffing levels and 23 per cent reduced staff hours. In May 2020, 18 per cent decreased staffing levels and 25 per cent reduced staff hours.
- The Accommodation and food services industry was significantly affected. In April 2020, 69 per cent of businesses in this industry had decreased staffing levels and 29 per cent had reduced staff hours. In May 2020, 50 per cent had decreased staffing levels and 21 per cent reduced staff hours.
- The Construction industry was significantly less affected by restrictions. In April 2020, 16 per cent of Construction businesses had decreased staffing levels and 24 per cent had reduced staff hours. These figures were consistent in May 2020.
- Some 8 per cent of all surveyed businesses reported that they had reopened, or were in the process of reopening, after closing at some point since the onset of COVID-19.
- Just over one third (34 per cent) of the businesses that had reopened were in the Accommodation and food services industry.
- More than half (61 per cent) of reopened businesses reported that they had closed primarily due to the impact of COVID-19 restrictions. More than one third (36 per cent) had closed due to a fall in demand for goods and services. This could have been a flow on effect from the COVID-19 restrictions on accompanying businesses.
- Of the businesses that had reopened, around half (52 per cent) were closed for at least a month, with 14 per cent closed for more than two months.
- Nearly one-third (31 per cent) of reopened businesses reported that they had reinstated all of their staff that they employed before the business closure, and a further 42 per cent had reinstated some of their staff. 26 per cent had not yet reinstated the staff they had previously employed, however, around two-thirds reported that they planned to reinstate some or all of their staff.
 ABS (2020) Business Impacts of COVID-19, Cat. No. 5676.0.55.003
 IMF (2020) World Economic Outlook Update, June 2020
 OECD (2020) Evaluating the initial impact of COVID-19 containment measures on economic activity, OECD Publishing
 OECD (2020) International Trade Pulse, May 2020
 NAB (2020) Business Innovation Index, July 2020
 National Skills Commission (2020) Impacts of COVID-19 on businesses – staffing changes by state and territory, July 2020
 National Skills Commission (2020) Impacts of COVID-19 on businesses – staffing update on selected industries, June 2020
 National Skills Commission (2020) Impacts of COVID-19 on Businesses – monthly staffing changes and reopening businesses, June 2020