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More than a third of businesses are expecting to struggle to meet financial obligations over the next three months, with small businesses twice as likely to face financial hardship.
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1 in 3 businesses will struggle to pay bills: ABS
28 August 2020
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9 minute read
The Australia Bureau of Statistics’ latest COVID-19 business impacts study also found that almost a quarter of businesses have decreased or cancelled their investment plans in recent months.
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Businesses were mostly worried about the future state of the economy, while uncertainty around customer demand for their products and services also played on their minds, resulting in them holding off on any investment expenditure.
Just 18 per cent of large businesses expect it to be difficult or very difficult to meet financial commitments over the next three months, compared with small and medium-sized businesses at 35 per cent 33 per cent, respectively.
Industries most likely to experience financial difficulties over the next three months were businesses providing accommodation and food services; transport, postal and warehousing; and arts and recreation services.
On a slightly more positive note, the latest ABS survey, conducted in mid-August, found that fewer businesses reported a decrease in revenue this month, at 41 per cent compared with 47 per cent in July.
Further, just over a quarter of businesses now expect revenue to decrease in September, down from 41 per cent in August.
Despite businesses being more reluctant to spend due to ongoing economic uncertainty, 36 per cent said government support measures such as accelerated depreciation and government-backed business loans were influencing their investment decisions.
Small and medium-sized businesses were more likely to report that changes to the instant asset write-off and other government support measures influenced business expenditure on capital compared to large businesses.
The $150,000 instant asset write-off has since been extended to 31 December, with the profession hoping for greater certainty on the measure during the October federal budget.
Investments falling
A separate ABS survey, which analysed actual new capital expenditure for the June quarter, found that investment spend had fallen by 5.9 per cent, compared with a 2.1 per cent decline in the March quarter.
Spending on buildings and structures fell by 4.4 per cent to $14 billion, and spending on equipment, plant and machinery was down by 7.6 per cent to $12.1 billion.
Businesses now expect that they will spend $98.6 billion on capital this financial year, 12.6 per cent lower than the estimate at the same time in 2019–20.
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