Christmas is a critical season for many retail businesses, and in 2021 was seen as the ticket out of the economic slump caused by the Delta lockdowns.
However, the Christmas cheer is well and truly over. Recent data released by CreditorWatch shows businesses suffered the worst business-to-business turnover on record in the critical month of December.
In response to underwhelming Christmas sales and continued economic stress, the NSW Government has announced a two-month extension of rent relief arrangements for small businesses suffering from COVID-19.
Disappointing Christmas sales
CreditorWatch data analyst James O’Donnell said businesses typically experienced a notable spike in revenue at the end of the year as households spent on Christmas shopping and holiday jolliness.
Mr O’Donnell said, “What we normally see in December is a [large] spike. It was a 5 per cent spike this year. It really is quite bad. Santa did not show up for businesses this Christmas.”
The December 2021 average trade receivables fell 45 per cent below 2020 turnover levels and hit the lowest point since the series began.
“When COVID-19 hit, business-to-business trade really fell off a cliff,” Mr O’Donnell said. “The figures we’re reporting for the December month are the worst we’ve got on record.”
The CreditorWatch data aligns with recent consumer spending data published by ANZ.
ANZ’s data found consumer spending in the first week of January was at its lowest level since the Delta wave of COVID-19.
Despite state governments lifting most COVID-19 restrictions, households imposed their own restrictions to avoid infection as Omicron surged, pushing the major cities into a “shadow lockdown”.
Economic outlook of the coming months
Despite the grim December data and widely reported “shadow lockdown” economists are hopeful things will begin looking up for business in the coming months.
One good sign of an economic turnaround is Australians’ high levels of household savings accumulated due to record government stimulus during the pandemic. These savings are likely to be spent back into the economy during 2022.
Another is the shielding of companies from debt collection activity. However, Mr O’Donnell said this debt holiday would likely come to an end this year.
“All the new signs are pointing to the default rates rising pretty steadily over the next 12 months. We are definitely not predicting carnage, though,” he said.
Mr O’Donnell said, for this reason, additional government support may be needed, though more targeted assistance than the previous $90 billion JobKeeper wage subsidy would be preferable.
Rent relief for businesses directly affected by COVID-19 presents a targeted government support approach.
Rent relief extension
On Saturday, NSW Treasurer Matt Kean announced a two-month extension to the state government’s rent relief policy.
The policy, first implemented in 2020, will continue until March 14 and preserves a requirement that 50 per cent of any rent relief must be in the form of a rent waiver with the remainder a rent deferral.
Treasurer Kean expressed that this extension was necessary to support struggling small businesses in communities across NSW.
He said in a statement, “Small business is the engine room of our economy, and we need to make sure we support impacted businesses through this latest Omicron wave.
“With staff shortages and reduced foot traffic, many businesses are struggling at the moment, but the ability to negotiate rent will give them a buffer so they can keep the lights on now and recover more quickly.”
Commercial and retail tenants will qualify for the relief if they have an annual turnover of less than $5 million and continue to meet eligibility criteria for since-discontinued JobSaver or micro-business grant programs.
Landlords will also have more time to apply for land tax relief, with applications extended until February 28 for those eligible.
For more information on rent relief visit: Small Business Commissioner (nsw.gov.au)
For more information on COVID-19 assistance for commercial and residential landlords visit: COVID-19 assistance for commercial and residential landlords | Service NSW