ABS Begins To Quantify Virus Damage

By Glenn Dyer | More Articles by Glenn Dyer

Tens of thousands of jobs across the economy continue to be lost as the Australian Bureau of Statistics said yesterday that one survey had found that half of Australian businesses have reported an adverse impact because of the coronavirus pandemic with 86% expecting to be hit in coming months.

That’s the first-ever survey conducted by the ABS on an issue as dramatic and dangerous to Australian business.

Based on the responses of 1217 businesses surveyed between March 16 and 23, the ABS found 49% had already experienced a negative impact. The most common impact was a drop in local demand.

Food and accommodation service businesses were the most heavily affected with 78% already reporting troubles and 96% of this group expect future negative effects.

The least affected so far were professional services (21%), utilities like gas and water supply (34%) and mining (37%). But all of these do expect longer-term impacts.

There were no real differences across the size of firms, with more than 80% of small, medium and large businesses expecting a negative impact in the coming months.

“A reduction in local demand was the most common impact experienced (82%) and was also the most common impact expected in the coming months (81%). Of impacted businesses, over a third had experienced staff shortages (36%) and 59% expected to experience staff shortages in the coming months,” the ABS said.

That was seen yesterday in another day of job losses, especially from retailing, casinos and airlines.

Women’s clothing store Glassons, with 33 outlets around Australia, emailed customers to tell them that they will be closing their doors indefinitely at 5 pm on Thursday.

“With the continued spread of COVID-19, our priority is to ensure our team and customers remain safe and healthy,” the email said. “We have made the decision to close our stores in Australia from 5 pm tonight.” the company said they will continue trading online as normal.

Today and over the weekend will see hundreds of shops will close, with tens of thousands of jobs lost or employees on forced leave and unpaid holidays.

Solomon Lew’s Premier Investments told investors it had “ o choice” but to temporarily close all of its retail stores until April 22, standing down over 9,000 people worldwide except for a small number of head office employees. Its brands include Smiggle, Peter Alexander, Jay Jays, Just Jeans, and Portmans.

Accessories retailer Lovisa will also close almost all of its 400 stores across the globe, with Singapore the only market continuing to trade, and stand down its entire retail workforce. Some head office workers also face redundancies as the company looks to support a “much smaller” business.

Accent Group, which owns a number of footwear brands including Athlete’s Foot, Skechers, Timberlands, and Platypus, will also shut its stores for four weeks with over 5,000 employees will be stood down with access to leave.

RAG Group, which owns brands such as Tarocash, YD, and Connor, will also close over 500 stores from 5 pm on Friday, standing down 3,000 people.

General Pants stores will also shut across the country, as will all 150 stores owned by retailing group Factory X, which include Gorman, Dangerfield, Princess Highway, and Jack London.

Earlier this week, Michael Hill Jewellers announced it would shut its 300 stores across the globe, including 165 Australian locations, and on Wednesday Mosaic Brands shuttered nearly 1400 shops in Australia, standing down 6,800 employees.

Qantas and Virgin are standing down upwards of 16,000 people between them on paid or unpaid leave with retrenchments very likely. Virgin is going to sack all 220 pilots at Tiger which will stop flying operations shortly.

Meanwhile credit rating group, S&P Global has warned the proportion of Australian home loan customers falling behind on their mortgage repayments is likely to rise to higher levels than it did during the global financial crisis, led by self-employed customers entering financial distress.

S&P analyst Erin Kitson said she expected mortgage arrears to rise more sharply than during the 2008 global financial crisis.

“We currently expect increases in arrears to be higher than during the 2008 global financial crisis, given the wide-ranging effects on the economy stemming from the sudden disruption to economic activity. Arrears will also rise much sooner than they did during the financial crisis,” Ms. Kitson said, commenting on mortgage-backed securities.

Mortgage arrears, a warning sign for banks, rose to 1.69% after the GFC, from a pre-crisis average of about 1.40%. The latest S&P data said mortgage arrears were 1.36% in January, up from 1.28% last December.

This is not a new forecast and will no doubt be followed by other projections from crystal balls.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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