Profits jump as hardest hit industries bounce back from pandemic

Massive government support and a partial recovery in trading conditions underwrote another solid quarterly lift in company profits growth.

The return of shoppers as restrictions eased likely powered a solid September quarter rebound.

The easing of COVID-19 restrictions across most of the country through the three months to September sent sales soaring in industries hardest hit by shutdowns, such as hospitality and the arts, as the economy rebounded solidly over the quarter.

Government support via massive programs such as the JobKeeper wage subsidy again boosted corporate coffers, Australian Bureau of Statistics data showed, as gross operating profits lifted by 3.2 per cent over the three months.

That brought year-on-year growth to 18.6 per cent after tens of billions in stimulus payments drove a 15.8 per cent spike in profits in the three months to June.

The seasonally adjusted ABS figures also showed an outsized lift in profits for the small business sector, which surged by 26 per cent over the quarter.

CBA senior economist Kristina Clifton said the strong profits in the third quarter was “largely the result of stimulus payments provided to businesses”, including the wage subsidy scheme.

The ABS figures offered another encouraging sign that the economy and businesses were charting a relatively rapid rebound from the sharpest economic contraction since the 1930s, even if that recovery remained incomplete.

NAB economist Tapas Strickland said the data was “overwhelmingly positive and point to a strong bounce back in activity” over the third quarter.

This was especially evident among accommodation and food services businesses, where sales jumped by 42 per cent over the three months after collapsing by 39 per cent in the previous period, while profits surged 35 per cent. Turnover in the arts and recreation sector climbed 27 per cent after plunging 37 per cent in the June quarter, while profits lifted by 12 per cent.

Sales for the two industries, however, remained down by 20-25 per cent.

“We expect to see profits start their move back towards normal levels from (the December quarter) as the JobKeeper payment is wound back and activity continues to improve,” Ms Clifton said.