Despite the partial recovery underway and the considerable adjustments made over the course of 2020, most Australian businesses continue to report negative impacts as a result of COVID-19, according to a new report from Ai Group.

Looking to 2021, the report, Business experiences in 2020 and outlook for 2021, finds that most businesses are set to retain at least some of the operational and workplace changes adopted in response to the pandemic. They are, however, acutely aware of weak demand for their goods and services. Further, despite the introduction of tax incentives for capital expenditure, most businesses have no plans to invest in the near term and non-mining business investment in 2020-21 is currently anticipated to be between 5% and 10% lower than in 2019-20.

In releasing the report, Innes Willox, Chief Executive of Ai Group said: “The economic recovery to date has been led by decisive policy measures on the part of the federal, state and territory governments and the Reserve Bank. While businesses are picking themselves up and bringing people back to work, many still worry that what we are seeing may be merely a bounce rather than the onset of self-sustaining momentum.

“The notion that COVID and its impacts will magically disappear when the calendar clicks over to 2021 is a fallacy. We are going to have to work harder than ever on rebuilding and regenerating our economy at a time of continued intense domestic pressure and increased global uncertainty and volatility. The next couple of months will be critical in signalling whether higher household confidence translates into enough additional spending to convince businesses to continue to lift employment and to commit to additional investment.”

Willox indicated that the top risks to Australia’s economy were the Federal Government reducing or removing fiscal support from business and employment too early, and the spreading geopolitical trade problems with China. He called on state and territory governments to get infrastructure pipelines flowing and urged the Federal Government to be ready with fiscal reinforcements if private sector demand does not accelerate.

The report found that in November, 84% of businesses reported continuing negative impacts from COVID-19, with the top five negative impacts being:

  • Reduced consumer demand (reported by 43% of businesses).
  • Activity restrictions (22%).
  • Disruptions to supply (9%).
  • Reduced productivity (7%).
  • Increased costs (5%).

Businesses had also continued to adapt to the COVID-19 shock, with the top five measures adopted in November being:

  • Increased use of technology (54% of businesses).
  • Reduced employee costs (27%).
  • Having staff work from home (21%).
  • Changed business strategy (8%).
  • Changes to accommodate social distancing (6%).

“The report maps the changing impacts on and responses of business over the COVID-19 period since February 2020 and highlights the dominant place that weak demand for goods and services has among business concerns with the ongoing impacts of COVID-19,” Willox said.