Invest
Sectors set for $60bn hit: Who and what will be worst affected?
COVID-19 is “carving a path through the incomes of Australians”, with new modelling forecasting billion-dollar income and profit hits across more than 15 Australian sectors. So, what industries will suffer the most?
Sectors set for $60bn hit: Who and what will be worst affected?
COVID-19 is “carving a path through the incomes of Australians”, with new modelling forecasting billion-dollar income and profit hits across more than 15 Australian sectors. So, what industries will suffer the most?
Chris Richardson is an economist and partner at Deloitte Access Economics who has predicted the almost $60 billion hit to the Australian economy in just four months and has flagged that the period from 1 April to 31 July will be “the likely deepest period of pain”.
Concerningly, the calculations made around lost wages and profits have already allowed for “the extraordinary support to families and businesses that has been rolled out by the federal government”, such as JobKeeper.
From numbers crunched by Deloitte Access Economics, the economic adviser has estimated that cafes, restaurants, pubs, hotels and motels (accommodation and food services) will be hit hardest over the four-month period – short around $8 billion in lost wages and profits.
“That’s the biggest hit to any industry, especially given that this is a small industry, accounting for only about one-fortieth of the economy overall,” Mr Richardson noted.
“The pain of lost incomes isn’t equally distributed. Not surprisingly, the deeper the lockdown impacts, the deeper the income losses.”
Arts and recreation – a sector comprised of gyms, sport, entertainment centres, conference centres, movie theatres and playhouses, is expected to be a close second in terms of impact – with profits and income losses of around $6.5 billion.
The third hardest hit sector is taking a big $5 billion hit – but that’s mostly because it’s a big industry, according to Deloitte.
Mining is likely to see a $5 billion drop in individual earnings and profit due to the struggles it is facing to get interstate fly-in, fly-out workers onsite.
In addition, several export earnings are suffering: “The record-low oil prices seen around the world also mean lower gas prices. Given that Australia is now the world’s largest or second largest gas exporter, that’s draining dollars we’d otherwise be earning.”
Construction is close behind, with just under $5 billion in lost earnings expected, despite the best efforts of all three tiers of government to speed up or add to the construction pipeline.
“A bunch of private sector projects are slowing, and some projects are being put on hold, as businesses reassess the need to build,” Deloitte flagged.
Coming in fifth and sixth place, respectively, based on probable profit hits, are professional services and banking and finance.
This is despite demand being up in areas such as IT, which contrasts with heavy losses in advertising, while lawyers and accountants are seeing less work alongside the fall in national commercial activity.
Manufacturing, rental and real estate, and retail can all expect income and profit losses of around $3 billion apiece, with Deloitte acknowledging retail as “a surprise packet in this list”.
“The hardest hit parts of that sector are obvious in any shopping mall and in a series of high-profile layoffs and stand-downs,” Mr Richardson conceded.
“But don’t forget that supermarkets are open, online sales are strong, and a bunch of specialty stores (such as hardware) are trading with social distancing rules in place.”
At the lower end of the scale, (although still predicted to see losses of up to $2.5 billion) are the sectors where taxpayers pay many (or all) of the bills, meaning that income losses are rather smaller, Deloitte explained.
Healthcare, wholesaling, information and telecoms, transport and postal, farming, the public sector and utilities will also see major drops.
Not beating around the bush, Mr Richardson commented, “These income losses are awful. Some small businesses have closed their doors forever.”
“But Australia has fought a world-class fight against the coronavirus, and it increasingly looks as if the worst will soon be behind us,” the forecast concluded.
About the author
About the author
Economy
Does the RBA boast the right credentials to steer the economy?
With the Reserve Bank of Australia likely to face its first independent review in 40 years, experts believe this could be a chance to bridge the gap between monetary and fiscal policy, but also to boo...Read more
Economy
Will Morrison commit to net zero by 2050?
Prime Minister Scott Morrison has yet again played down the impacts of climate change, referring to net zero as an aggressive and frustrating target. ...Read more
Economy
Consumer confidence holds ahead of reopening
The battle between consumer confidence and caution looks to be on a knife’s edge in the coming weeks. ...Read more
Economy
Unemployment fell again in August, but not for good reasons
Employment and hours worked fell nationally in August, with NSW leading the pack. ...Read more
Economy
ACCC steps in on Qantas-Japan Airlines partnership
Australia’s competition authority says that the short-term benefits of a new partnership between Qantas and Japan Airlines don’t outweigh the long-term costs to competition in the sector. ...Read more
Economy
NAB optimistic on jobs market despite another payroll miss
NAB has expressed confidence in the short-term future of the Australian jobs market, despite payroll jobs decreasing by 0.7 of a percentage point in the last fortnight, following a drop of 1.8 per ce...Read more
Economy
New and improved takeover bid sees Sydney Airport open books
The Sydney Aviation Alliance consortium, led by the IFM Investors, has been granted access to Sydney Airport books after submitting a revised acquisition proposal. ...Read more
Economy
ACCC cites LCR as it gives payment processing merger the go-ahead
The local competition watchdog has given its approval of a merger between three major players in Australia’s payment processing sector. ...Read more
What to expect as the end of lockdown looms? Will the Stage 2 tax cuts boost your tax return? Where should investors be looking as the economy reopens?
Listen now
Could property prices inflate by another 20%? What’s happening in recent dividend announcements? Did your fund fail the YFYS test?
Listen now
What does the NSW regional permit mean for property investors? Who really wins from the BHP-Woodside merger?
Listen now
The sea and tree-change norm; Square’s acquisition of Afterpay; Why you should think twice before turning to TikTok for advice
Listen now
Economy
Does the RBA boast the right credentials to steer the economy?
With the Reserve Bank of Australia likely to face its first independent review in 40 years, experts believe this could be a chance to bridge the gap between monetary and fiscal policy, but also to boo...Read more
Economy
Will Morrison commit to net zero by 2050?
Prime Minister Scott Morrison has yet again played down the impacts of climate change, referring to net zero as an aggressive and frustrating target. ...Read more
Economy
Consumer confidence holds ahead of reopening
The battle between consumer confidence and caution looks to be on a knife’s edge in the coming weeks. ...Read more
Economy
Unemployment fell again in August, but not for good reasons
Employment and hours worked fell nationally in August, with NSW leading the pack. ...Read more
Economy
ACCC steps in on Qantas-Japan Airlines partnership
Australia’s competition authority says that the short-term benefits of a new partnership between Qantas and Japan Airlines don’t outweigh the long-term costs to competition in the sector. ...Read more
Economy
NAB optimistic on jobs market despite another payroll miss
NAB has expressed confidence in the short-term future of the Australian jobs market, despite payroll jobs decreasing by 0.7 of a percentage point in the last fortnight, following a drop of 1.8 per ce...Read more
Economy
New and improved takeover bid sees Sydney Airport open books
The Sydney Aviation Alliance consortium, led by the IFM Investors, has been granted access to Sydney Airport books after submitting a revised acquisition proposal. ...Read more
Economy
ACCC cites LCR as it gives payment processing merger the go-ahead
The local competition watchdog has given its approval of a merger between three major players in Australia’s payment processing sector. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
