SOME 17% of small business loans have had their repayments deferred as at June but at least 250,000 Melbourne businesses forced to close by the stage four restrictions are ineligible for the Victorian government grant, as figures show only 12,600 have qualified for the Business Support Fund Expansion.
According to the Australian Prudential Regulation Authority (APRA), although small business loans have a higher incidence of repayment deferral with $55 billion or 17% of $321 billion total loans outstanding, housing loans accounted for the lion share with $195 billion deferred, representing 11% of $1.8 trillion total owed.
In total $274 billion of loans have had repayments deferred as at 30 June, which is close to 10% of total loans outstanding. Overall, the composition of loan repayment deferrals remains relatively stable with the most noticeable change being increased loans exiting from repayment deferral, from $2 billion in May to $18 billion in June. APRA said most of these loans have returned to a performing status.
However, these figures do not reflect the Victorian government re-introducing stage three restrictions last month and stage four this week.
Small businesses and the housing market in Victoria are expected to be particularly hard hit by the heightened lockdowns. Economists predict Melbourne house prices could fall up 15 to 20%.
From 11:59PM this Wednesday, all non-essential retail will forced to shutter over the next six weeks. Only supermarkets, grocery stores, bottle shops, pharmacies, petrol stations, banks, newsagencies, post offices are permitted to operate.
Premier Daniel Andrews said the Victorian government has pledged to help small businesses forced to close over that period by increasing the Business Support Fund Expansion grant from $5,000 to $10,000, to match the first package.
But unlike the first package, only businesses with WorkSafe insurance are eligible for assistance. As a result, only 12,600 businesses have qualified so far, totalling $63 million compared to 77,600 businesses in the original Business Support Fund, totalling $776 million.
Small Business Australia, which represents five million people in the sector, executive director Bill Lang told 7News that as many as 250,000 sole traders and small businesses that were ineligible for the JobKeeper subsidy will also miss out on the Victorian government Business Support Fund Expansion grant because they do not meet the criteria including that they must be eligible for JobKeeper and employ at least one staff as well as be registered for WorkSafe insurance.
Lang said these businesses including mums and dads retail stores, are in desperate need of financial support with many being told they must now close for six weeks.
“They’ve already had quite a reduction in sales over the last few months,” he said.
Lang called on the federal and state governments to provide support, a “small business saver package” to protect these businesses which will be forced to close.
The Council of Small Business Organisations Australia (COSBOA) is also making similar calls, for a $10,000 Business Survival Grant to all registered businesses including sole traders, partnerships, and family trusts.
COSBOA CEO Peter Strong called on the federal and state governments to co-fund this survival package which would not be subject to any eligibility requirements whatsoever.
“There are hundreds of thousands of business people affected by this decision and they will need immediate support and assistance to ensure that they can reopen in six weeks” Strong said.
“This is a critical moment for the management of a COVID second wave and for the individuals in Melbourne who are personally affected and whose families are also deeply affected. We must give them as much certainty now and for the future. The ability for businesses to impose immediate stand downs for employers for the six week period will provide protection for employees’ jobs and for the business assets,” he added.
Without support at least 250,000 sole traders and small businesses are at risk of going under, which is almost 30% of the 904,000 businesses registered in Victoria.
“For many struggling businesses already only just hoping to make it through stage three restrictions, closing for six weeks will be the end,” The Victorian Chamber of Commerce and Industry chief executive Paul Guerra said.
Victoria opposition leader Michael O’Brien said small businesses will be particularly hard hit, with many shopping strips becoming ghost towns.
“Many will not recover,” he said.
O’Brien called for Premier Andrews to do more.
“Sole traders, in particular, have been left behind. The smallest of the small businesses deserve extra support, not being ignored.” O’Brien said.
The latest restrictions means around 1 million workers across Victoria will be impacted, including 256,600 who have already been stood down. KPMG predicts an extra 130,000 people will lose their jobs over the next six weeks, taking state’s unemployment rate to more than 11%.
Reserve Bank governor Philip Lowe said on Tuesday that Australia’s baseline unemployment rate will rise to around 10% later in 2020 due to further job losses in Victoria.
AMP Capital chief economist Shane Oliver estimates the stage three and four lockdowns in Victoria will cost at least $12 billion.
“Based on New Zealand’s experience with a stage 4 lockdown and allowing for the fact that Victoria had never fully recovered from the initial lockdown, we estimate that this will cost the Victorian economy around $12bn to $14bn. This is up from an initial estimate of the cost of the stage 3 lockdown of Melbourne of $5bn,”
Oliver said additional stimulus will likely be needed.
“At time of the Federal Government’s Economic and Fiscal Update we felt that the deficit projection of $184.5bn for this financial year was too optimistic and saw it closer to $220bn reflecting softer revenue and more stimulus than the government was allowing for. The tightening lockdown in Victoria has added to this and we now see the deficit this financial year as ultimately being closer to $235bn.” Oliver said.