The Government acted swiftly and decisively at the start of the COVID crisis to minimise the impact on the economy. Key stimulus measures including the JobKeeper program, cash flow boost, rent relief, Government secured banks loans and State Government grants have allowed thousands of SME’s to keep operating.
Without the stimulus measures the unemployment rate which was listed at 7.1% in June would be significantly higher. In fact the ABS noted that the official unemployment rate would be 11.3% if the Jobkeeper program had not been introduced. The problem is the program will end in September and with the second COVID wave hitting Victoria the economy is not ready to be taken off life support.
A recent Westpac report provided an interesting insight into the uptake of the Jobkeeper program by industry. The top 5 industries were:
- Professional Services 12%
- Heathcare 11.7%
- Construction 10.5%
- Hospitality 9.5%
- Retail 9.5%
The combination of rent relief ending, job keeper payments ceasing, bank loan repayment holiday ending signals the cliff is real and it is coming.
The question is what measures are likely to be introduced on both a Federal and State level. The Victorian Government has announced a further $534 million dollars of support will be provided. This includes $5,000 once off cash grants to any SME (Payroll under $650,000) and a further $30 million fund to support Victorian Hospitality businesses.
An additional $40 million is expected to be provided to tourism based businesses operating outside of Melbourne, presumably to help them with booking refunds and marketing when travel is once again allowed.
The payroll tax deferral scheme is expected to be extended and the banks have pledged to extend the current repayment holidays for viable customers.
However, the above measures alone will not prevent many SMEs falling off the cliff. An extension of the Jobkeeper or a program with similar effect is critical to many small businesses staying alive. The fact that the original Jobkeeper program cost the Government $60 billion less than forecast could be the silver lining. If these funds can be reallocated to those businesses and employees in greatest need then the length and severity of the recession, we are entering will be greatly reduced.
The Treasurer Josh Frydenberg will announce the additional stimulus measures to be implemented post the Jobkeeper program on 23rd July.
With the above said, the hand out of money is a short term measure that has long term consequences. SME business owners must be planning for all scenarios and have detailed forecasts and plans to ensure their business exists once COVID does not. For any SME needing assistance with managing the current situation, we are offering an initial no fee consultation to outline your options. You can book you consultation here.