Highly anticipated third COVID-19 stimulus takes shape
(30 March 2020 – Australia) Australian Prime Minister Scott Morrison confirmed a third economic stimulus package is nearing completion, pleading with businesses to avoid further shutdowns or headcount reductions ahead of a third stimulus package to be announced this week.
The measures specifically seek to support the ‘hibernation’ of Australian enterprises to ensure they can resume operations following the current wide scale coronavirus pandemic restrictions, now strictly limiting public and private gatherings to two persons and enforcing mandatory 14 day isolation for all international visitors as inter-state border restrictions also take hold.
The new package is expected to include a A$1500 a fortnight ‘job keeper’ allowance for those whose employers go into hibernation for the next six months. The government has already confirmed two stimulus packages worth more than A$80 billion aimed insulating businesses and employees from the devastating impact of the COVID-19 pandemic.
The third business support tranche is designed to ensure businesses forced to close as a result of the lockdown can avoid onerous debt balances, insolvency or long term closure and re-hire staff following the coronavirus pandemic currently crippling the global economy. Ultimately the hibernation period ensures corporates can navigate the crisis with as minimal ‘scar tissue’ as possible, but by no means will exit the shut down debt free.
“We want these businesses to effectively go into hibernation, which means on the other side, the employees come back, the opportunities come back, the economy comes back. There will be a burden for everyone to share and that will include the business as well” Mr Morrison stated.
“The next stage will be even bigger than anything you have so far seen. It is part of the hibernation strategy of ensuring that we keep people connected with their businesses and with their jobs, so on the other side of this Australia can bounce back stronger” he added.
Based on the responses of 1217 businesses surveyed by the Australian Bureau of Statistics (ABS) between March 16 and 23, one in two had already experienced a negative impact from the enforced coronavirus shut downs (49 percent). The most common impact was a drop in local demand. Food and accommodation service businesses were the most heavily affected with 78 percent already reporting issues with 96 percent of this group expecting future negative effects. There were no real differences across the size of firms, with more than 80 percent of SMEs expecting a negative impact in the coming months. A reduction in local demand was the most common impact experienced (82 percent) and was also the most common impact expected in the coming months (81 percent). Of impacted businesses, over a third had experienced staff shortages (36 percent) and 59 percent expected to experience staff shortages in the coming months.
Commonwealth Bank has expanded its range of support measures for business customers impacted by coronavirus, announcing additional loan repayment deferrals, automatic merchant fee waivers, and tailored assistance for larger businesses.
“The only way for small businesses to survive the coming months is if they can effectively hit pause for the time being. For businesses to bounce back when this health crisis is over, they need a holiday from all costs that they incur during this extremely difficult period” Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell stated.
“Small businesses – including those that are forced to shut their doors as well as those who suffer a significant loss of income – should be able to go into business hibernation. It’s a mammoth effort that requires everyone to come together and be a part of the solution. Landlords, utility and service providers, telecommunications and all levels of government will need to put their fees and charges on hold or face losing that customer altogether if there is a tidal wave of insolvencies.”
“Part of this needs to be a wage subsidy for staff that remain attached to the business. Those staff would need to be paid at least 60 percent of their wage up to a maximum monthly amount. This of course would need a minimum safety net built in. Small businesses are the engine room of the Australian economy and need our support more than ever right now. We are at a critical tipping point, but we can get through this if we work together.”
The next National Cabinet meeting co-ordinating federal funding and state based legal, administrative and legislative responses has agreed to work to a common set of principles:
A short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe distress due to coronavirus
Tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease
The reduction or waiver of rental payment for a defined period for impacted tenants
The ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress
Commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus
Landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements
Cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance