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NSW business confidence crashes in wake of COVID-19

Release Date: 9/04/2020
Coronavirus restrictions have had a dramatic impact on business in the Hunter, with the Business NSW Business Conditions survey showing parts of the region were the hardest hit in the state by the cumulative effects of drought, bushfire and COVID-19 during the March quarter.
The special COVID-19 edition of the survey, which included more than 200 Hunter responses from a total of almost 2,000 across the state, clearly shows the extent of the impact that multiple economic shocks have had on the NSW economy over the first quarter of 2020.
Responses were collected over two weeks in late March, with the increasing impact of restrictions on movement and social gathering clearly illustrated in feedback received from the first week to the second.
“The survey shows the transition from early-phase impacts relating to supply chain interruptions and reduced overseas visitor arrivals to the full-scale economic crisis we are now seeing,” Hunter Business Chamber CEO Bob Hawes said.
“Business conditions have deteriorated rapidly. There was a doubling of COVID-19-related revenue losses reported by respondents between weeks one and two of the survey period.
“Businesses have had to enter hibernation with significant adjustments to staffing levels and capital spending, and it’s clear that some won’t make it through to the other side.
“The impact of COVID-19 on confidence is most apparent in business expectations for the next quarter, with confidence falling to levels not seen since the Global Financial Crisis.”
Mr Hawes said while COVID-19 represented the most significant threat to the economy, the survey showed that many local economies had already been significantly weakened by other factors, including bushfires and drought.
A table in the report assessing the cumulative effects of all these factors on business revenue showed the Hunter Valley to be the most severely affected region across the state.
“This reinforces our understanding about the severe ‘indirect’ impact of the bushfires on our visitor economy, where we saw people staying away in droves from tourist strongholds like the vineyards and Port Stephens due to thick smoke haze or fear of fire,” Mr Hawes said.
“These places experienced significant downturn during what would normally be the peak Christmas period and are now facing a bleak Easter, with no chance of economic recovery.”
Businesses in the Newcastle and Lake Macquarie statistical area were less affected than those in the Hunter Valley but still showed depressed levels of confidence which Mr Hawes said would be regarded as “catastrophic by normal standards”.
The report shows significant downturn across the state in most key business indicators:
• 67 per cent reported reduced profit;
• 61 per cent reported reduction in sales revenue;
• 47 per cent reported reduction in capital spending;
• 27 per cent had reduced staffing levels.\
There has been a rapid shift in business priorities away from growth objectives such as expanding capacity and growing revenue, with businesses instead becoming more concerned about business solvency and downsizing.
Tourism was the most severely affected industry, with Arts and Recreation services and Accommodation and Food Services all showing significant revenue loss from the cumulative effect of coronavirus, bushfires, drought and other weather events.
Seventy per cent of businesses said they would have to either cease trading or scale down substantially in the event of sustained social distancing or lockdown measures.
Nearly 90 per cent of respondents expected the June quarter to be weaker than March.
“All of these trends are consistent with what has been observed through our daily engagement with businesses over the past weeks and why it is so important that every tier of government does all that is possible to keep businesses in operation and staff employed,” Mr Hawes said.
“It is also clear that further restrictions on movement and social gathering would be highly detrimental to business, so it is important that the community observes the current rules and regulations, especially over the coming holiday period, so we don’t see more limitations imposed.”
The full survey results can be found at:

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