From an earlier survey, we reported that 66% of firms had anticipated their cash flow to be negatively impacted by the COVID-19 crisis (see here). That number lifted to 72% in this survey, with firms in accommodation and food services (88%) and education and training (88%) — 2 of the 3 most affected industries by social distancing measures — anticipating the largest cash flow impacts. The next highest impact was reduced demand (69%) followed by government restrictions (53%). In both cases, the arts and recreation sector ranked number 1 of all industries. The full details are shown in the table, below.
Source: ABS
Regarding the Federal government's wage subsidy (or JobKeeper policy), 61% of firms said they had registered or intended to register to participate in the scheme. The JobKeeper policy subsidises the wages of eligible employees of qualifying business to the amount of $1,500 per fortnight for 6 months. For a business to qualify, turnover needs to have fallen by 30% (where the level is less than $1bn) on the same period a year ago, which raises to a 50% requirement where turnover is above $1bn. The take-up is around 60% for both small and medium sized businesses and declines to 45% for large firms. By industry, the highest rates of participation are in construction (80%), administraive services (79%) and accommodation and food services (76%). So far, the JobKeeper policy has had a significant impact with 44% of firms saying it had influenced their decision to keep employees on the payroll. Maintaining the employer-employee link aims to facilitate a more efficient return to business as restrictions ease. According to the chart below, that effect had been most pronounced in accommodation and food services, other services, construction and manufacturing.
Source: ABS
Reasons for not participating in the JobKeeper scheme are overwhelmingly due to ineligibility across businesses of all sizes. One of the major criticisms that has been leveled at the policy is that it requires a business to fund wages for employees out of its own cash flow with the subsidy being paid by the ATO in arrears. However, this survey suggests that a lack of cash flow is preventing only a very small percentage of businesses from registering for the scheme. In fact, a lack of understanding of the eligibility criteria looks to be just as much of a concern overall.
Source: ABS
The other key insight from the survey was around capital expenditure intentions. Over the period from December 2019 to March 2020, 16% of firms had lowered their capex plans for the 2020/21 year, 8% of firms had lifted their investment intentions, the outlook from 73% of firms was not expected to change and just 3% had committed to keeping capex levels unchanged. These numbers come from a sub-sample of firms in the ABS's Capital Expenditure Survey with the results pointing to a weak outlook in line with deteriorating economic fundamentals when that report is released on May 28.
