Summary of findings
Summary of findings for the experimental quarterly CABEE data showing changes compared to previous quarters and leading impacts during the COVID-19 pandemic.
In the May 2020 quarter, in original terms, the number of businesses in the Australian economy increased by 1.3%, or 31,477, to 2,422,404. By August 2020, there was a further increase in the number of businesses of 1.4%, or 34,300, to 2,456,704.
In seasonally adjusted terms, in the May 2020 quarter, the number of businesses in the Australian economy increased by 0.7%. Business Entries in this quarter grew by 0.3%, and Business Exits decreased by 8.2%. In the August 2020 quarter, in seasonally adjusted terms, the number of businesses in the Australian economy again increased by 0.7% and both Business Entries and Business Exits increased - by 2.3% and 1.1% respectively.
Considering the restrictions on business operations and the economic climate at the time, the increase in businesses during the first 6 months of the COVID-19 pandemic in Australia may seem counter intuitive. Looking at the data in more detail shows a compositional difference underlying this growth.
Business entries and exits
In the May 2020 quarter, Business Births were the lowest recorded in a May quarter over the last three years, and down 9.0% on the same quarter last year. There is generally a minimal reporting lag in new business registrations, so the decrease in the number of Business Births may be a result of COVID-19, and the associated government restrictions.
In the August 2020 quarter, when a number of states and territories began easing COVID-19 restrictions, Business Births returned to levels consistent with the same time last year.
In the May and August 2020 quarters Other Entries, including businesses that had reactivated a cancelled ABN, or businesses lodging their BAS after a period of inactivity, were the highest of any period in the last three years. This may be linked to businesses reactivating due to increased demand and innovation, or the Commonwealth and State government support packages available (in particular where these required up-to-date ABN details, lodgements of BAS and/or Tax Returns as part of the eligibility criteria).
Business Cancellations in the May and August 2020 quarters were slightly lower than the same quarters in the past two years.
Lower levels of Business Cancellations may be influenced by a range of factors, for example: the time it takes for a business to formally close; delays in the reporting process; the government support packages currently available to businesses aimed at mitigating the impact of COVID-19 and supporting economic recovery (including the temporary changes to the insolvency safe harbour rules); businesses pausing temporarily to determine ongoing viability; or an increase in demand and innovation in some industries.
Business Exits typically occur sometime after the business has ceased operating due to the time it takes to formally wind-up a business. As such, an increase in Business Exits as a result of COVID-19 would not yet be reflected in the data in this paper, and may occur in subsequent quarters.
The increase in Other Entries and the low Business Cancellations have resulted in the number of businesses continuing to increase during COVID-19.
The industry divisions most impacted by COVID-19, including Retail Trade, Accommodation and Food Services and Other Services, had higher Other Entries and lower Business Cancellations than in previous periods.
The Transport, Postal and Warehousing industry division has been the strongest growing industry in recent years, but in the August 2020 quarter only recorded a marginal increase of 0.1%.
In the May 2020 quarter there was a substantial decrease in the number of businesses in the 5-19, 20-199 and 200+ employment size ranges. In the August 2020 quarter, this reversed to some degree with the number of employing businesses - across all employment size ranges - increasing. These changes were primarily influenced by the movement of surviving businesses between employment size ranges. While the increase in the August 2020 quarter was moderate, the number of businesses in the 20-199 and 200+ employee size ranges were 5.4% and 4.0% lower than pre-COVID-19 levels respectively.