Australia Bucks COVID Recession on Extraordinary Sales Recovery - ABS
(04 December 2020 – Australia) Government stimulus and reopening markets super charged a recovery in sales across the Australian economy in the last quarter, particularly in sector verticals who felt the brunt of the shut downs such as tourism, hospitality, travel and services.
Australian Bureau of Statistics (ABS) data confirmed profits bounced back by 3.2 percent in Q3 2020 as COVID restrictions were wound back and borders reopened. Government stimulus measures such as JobKeeper and Jobseeker drove significant corporate profit taking with year-on-year growth of 18.6 percent recorded. Sales recovered strongly in accommodation and food services businesses in particular, accelerating 42 percent in Q3 2020 after slumping by 39 percent in Q2 2020 coupled with a profits surge of 35 percent noting overall sales remain suppressed by up to 25 percent in the longer term.
Under one in two Australian small businesses expect revenue growth through to Q1 2021, new research by ScotPac and East & Partners shows based on direct interviews with 1252 SMEs nation wide as part of its twice-yearly research into the small business sector. ScotPac CEO Jon Sutton said of the small businesses surveyed, 47 percent were expecting revenue growth through to April 2021, with a quarter forecasting revenue to decline.
"In the midst of Australia's first recession in 30 years, a record-low number of SMEs have positive revenue growth aspirations. Revenue forecasts for the small business sector are less 'doom and gloom' than might be expected after such a challenging 2020, and highlight the resilience of the SME sector" Mr Sutton said.
“Small businesses remain out of kilter with resurgent middle market and institutional enterprises. Given they represent the lion share of employment in the Australian economy demographically, this confirms the recovery is not a pre-destined fact as confidence to invest for growth will take some time to recover” stated East & Partners Head of Markers Analysis, Martin Smith.
“Capital expenditure is the key indicator and it remains to be seen whether the expanded accelerated deprecation provision and temporary full expensing changes will do enough to bridge the gap when stimulus measures taper off in Q1 2021” Mr Smith added.
“The strong profits in the third quarter were largely the result of stimulus payments provided to businesses, including the wage subsidy scheme. We expect to see profits start their move back towards normal levels from the December quarter as the JobKeeper payment is wound back and activity continues to improve” commented CBA Senior Economist Kristina Clifton.
“The data is overwhelmingly positive and point to a strong bounce back in activity over the third quarter” stated NAB Economist Tapas Strickland.
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