Sep 17 2020
Leading industry research company IBISWorld has published an in-depth breakdown of how the COVID-19 pandemic is affecting every subdivision in the economies of Australia and New Zealand. This report, compiled by a team of senior industry analysts, classifies the level of disruption for each subdivision, and provides analysis on the key factors that have determined performance over 2019-20, and will affect each subdivision in 2020-21 and beyond.
The worsening COVID-19 outbreak during 2020 has had a significant and growing influence on domestic and international economic activity. Australia and New Zealand have been relatively successful in containing COVID-19 compared with other regions. However, supply chain disruptions, and ongoing travel and tourism restrictions continue to hinder Australia and New Zealand. Overall, the virus’ impact on economic activity has been highly damaging, leading to the first technical recession in Australia since 1991-92.
‘IBISWorld has classified the degree of impact for each subdivision as moderate, high or very high. The level of disruption depends on the degree of exposure to international trade, and the impact on business and consumer confidence,’ said Senior Industry Analyst Matthew Reeves.
COVID-19 has negative affected the Australian and New Zealand economies by disrupting consumer demand and business supply. Consumer sentiment has deteriorated significantly, weakening demand across most industries. Households have scaled back discretionary spending due to fears relating to rising unemployment and economic uncertainty. Many businesses have abandoned or postponed investment in new productive capacity to retain cash and provide a liquidity buffer to survive the COVID-19 pandemic. Supply chain disruptions in Australia and New Zealand, and in foreign markets have also hindered business activity, further dampening economic growth.
Some subdivisions are expected to outperform during the COVID-19 pandemic. Social distancing has pushed many consumers to online channels for shopping, communication, food purchases and working arrangements. This trend has driven a surge in sectors such as online shopping, postal services, and data storage services. Some industries in the Mining subdivision have benefited from declining operating costs associated with lower fuel prices. Other industries have suffered direct negative effects, but have also seen positive factors, such as rising demand for repairs and maintenance services replacing new purchases.
The Victorian Government has implemented Stage 4 restrictions from 2 August, including a nightly curfew and unprecedented curtailment of economic activity. These restrictions are set to have a major and long-lasting impact on both the Victorian and national economies.
In Victoria, 250,000 employees are expected to be stood down this week. This figure is in addition to the roughly 250,000 Victorians who have already lost employment since the COVID-19 outbreak emerged in February 2020. While the original loss of employment was primarily concentrated in hospitality and tourism industries, the latest job losses are far more widespread. Imminent job losses will be concentrated in the retail, wholesale, construction and manufacturing divisions, which accounted for 58.7% of Victoria’s Gross State Product (GSP) in 2018-19. Over 500,000 Victorians are already working from home, and one million teachers and students will not attend school throughout the lockdown period.
An economic update provided by the Victorian Government in late July 2020 outlined an expected budget deficit of $7.5 billion in 2019-20, down from a $618 million surplus originally anticipated for the year. The update also predicted a 5.25% GSP decline for 2020, and a 6.25% recovery in 2021. However, these figures were predicated on a six-week Stage 3 lockdown through to 20 August 2020. The far-reaching Stage 4 restrictions through to mid-September are expected to cost Victoria between $20 and $25 billion. Victoria’s GSP is estimated to be about 14% lower in the June and September quarters relative to forecasts in the 2019‑20 state budget, dropping $55 billion over an 18‑month period.
Many large national retailers no longer qualify for JobKeeper, forcing their Victorian employees to rely on accrued leave or JobSeeker support throughout the six-week lockdown. Wesfarmers’ major brands, including Kmart, Target, Bunnings and Officeworks, employ over 25,000 people in Victoria and are not eligible for JobKeeper support.
The effects of the Stage 4 lockdown will extend far beyond the next six weeks. The latest restrictions are anticipated to create gaps in supply chains across the Manufacturing division, which will likely be met by interstate companies. While this resolution will alleviate the national implications of the Victorian lockdown, it will also lead to a permanent loss in market share for Victorian enterprises to interstate competitors.
The Roadmap to Reopening, provided by the Victorian Government, suggests that strict lockdown restrictions are expected to remain in place until late October, with many industries remaining closed until November 23rd.
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For more information, to obtain industry reports or to arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647