The number of firms shutting up shop for the last time is on the rise, but the business landscape is still in a better position than the outlook a year ago when the economy was deep in recession.
The latest CreditorWatch business risk review shows the number of businesses going into administration rose by 23 per cent in the June quarter, but that is still 21 per cent lower compared to a year earlier.
“Businesses didn’t fall off a cliff as many feared at the start of the year,” CreditorWatch chief economist Harley Dale said.
But CreditorWatch CEO Patrick Coghlan warns the extended lockdown in Sydney is a stark reminder of the economic vulnerability of some industries.
“We’ll need to keep a close eye on these as the first half of Australia’s financial year progresses,” he said, releasing the review on Wednesday.
Businesses will also be relieved after the federal government agreed to fence off the cliff in locked down Sydney with a support package.
The $500 million a week cashflow boost and JobKeeper-style wage payments for workers whose hours have been reduced have been welcomed by businesses.
“Those programs now form a template that can be rolled out in other states and territories,” Treasurer Josh Frydenberg told Sky News.
He said Australia has transitioned to a different form of economic response, with localised outbreaks not a nationwide crisis.
But access to vaccines remains crucial for any return to normality.
National Australia Bank’s monthly business survey showed both confidence and conditions took a hit in June, reflecting the early stages of the Greater Sydney lockdown, as well as earlier snap restrictions in Brisbane, Darwin and Perth.
Both measures are retreating from record highs in recent months.
“Overall business conditions will likely deteriorate further in July under an extended, stricter NSW lockdown,” ANZ senior economist Catherine Birch said.
But she expects once the outbreak is brought under control and restrictions begin to ease, conditions and confidence should both rebound quickly unless virus cases spread to regional NSW or other states that would see restrictions reinstated.
The Westpac-Melbourne Institute consumer sentiment survey for July is also released on Wednesday.
Its sentiment index tumbled 5.2 per cent in June, which is before the impact of the Sydney outbreak was felt.
The weekly and more up-to-date ANZ-Roy Morgan consumer confidence index released on Tuesday surprisingly rose, paring back losses in the previous week.