Omicron weighs heavily on commercial activity
Business activity in December was much weaker than expected, due to staff shortages, supply chain disruptions and weakening consumer confidence following the Omicron variant.
Credit reporting agency CreditorWatch now expects business activity to decline throughout the first half of 2022.
Its Business Risk Index report for December said Christmas business activity was the weakest on record, down 45% from December 2020.
“Everyone expected the rapid spread of Omicron to have a significant negative impact on Christmas trading, but few would have predicted it would be this extreme,” said Patrick Coghlan, CEO of CreditorWatch.
“You can’t blame people for wanting to stay home. We can only hope the peak comes soon and the business community can get back on its feet.
However, its business risk index – which measures the likelihood of default over the next 12 months – fell slightly in December to 5.7% from 5.79% in November.
The index covers 300 regions across the country.
Newcastle and Perth are the two metropolitan centers that have rebounded the most from the pandemic, compared to Melbourne which continues to struggle with the prolonged lockdown in 2021.
More generally, defaults, external administrations and legal actions all fell in December after strong increases in November.
“Australia’s economy undoubtedly rebounded in the December 2021 quarter and retains some momentum through 2022, but is on a bumpy ride as Omicron bites,” the report said.
“With such high vaccination rates, we will pass, but many SMEs have been hit hard.”