It’s Rough for Business Right Now

It probably comes as a surprise to no-one, but the current Omicron outbreak is having a significant dampening effect on the economy, making what was already a tough time for small businesses that much harder.

Economic forecasts for the month of January are sharply down on pre-omicron projections, with economic growth for the March quarter expected to be around 1% to 1.5%, down from the 2% to 2.5% forecast pre-Omicron.

Businesses are struggling to find staff to keep their doors open as workers are forced into isolate or can’t work due to illness. Goldman Sachs estimates that between 24 and 76 million hours of work could be lost in January alone.

Consumers have also pulled back, staying home rather than getting out and spending. While many are forced into seven day isolation due to a positive test or close contact, we are also seeing people self-regulate and adjust their behaviour in light of the increased risk of catching COVID-19. Data from ANZ shows that national spending for the week ended 5 January was at its lowest level of the entire pandemic in Sydney. While other stated saw the lowest level of sending since their lockdowns ended.

The drop in spending is reflected in consumer confidence which has taken a hit during the first week of January, falling 2.4 points, while only 14% of Australians expect ‘good times’ for the Australian economy over the next 12 months.

I expect these tough conditions will be with us for a further six to eight weeks. In NSW, which is ahead of the other states, we are still a couple of weeks away from peak infections. Once we are past the peak, it will take a few weeks for case numbers and hospitalisations to fall and then a few more before consumer confidence and spending start to bounce back.

All of this adds update a really difficult time for businesses, who can’t find staff to keep their businesses open, and then can’t find customers willing to get out and spend even when they are open. This new challenge comes at a time when business were already dealing with the economic hangover of trading through lockdowns and the withdrawal of government support.

For businesses facing difficulty now is the time to reach out to your trusted advisors and put a plan in place to preserve the business through the next couple of months.