Recession Threat Looms as Banks Extend Support to Lock Down Hit Enterprises
(14 July 2021 – Australia) The Australian Banking Association (ABA) has announced support for businesses adversely impacted by continuing COVID-19 lockdowns as Sydney’s plunge back into extended lockdown for up to two months will cause the national economy to shrink in Q3 2021 and increase unemployment, stalling Australia’s recovery from the pandemic recession.
Australian banks are extending additional support to businesses suffering as a result of lockdowns throughout Australia. The national support package will be available to all small businesses significantly impacted by current lockdowns and those recovering from recent lockdowns, irrespective of geography or industry. Support includes up to three-month repayment deferrals, with loan terms extended accordingly, offered to all small business customers with business lending less than A$3 million and a turnover of less than A$5 million for loans in good standing.
Small businesses can access grants of A$10,000 if turnover declines 70 percent, A$7000 for a 50 percent decline and A$5000 for a 30 percent decline, a move backed by the Council of Small Business Organisations Australia given the widespread impacts during school holidays. NSW accounts for one-third of gross domestic product (GDP) and greater Sydney employs one fifth of the national workforce. The longer other state borders remained closed to NSW, it would impede cross-border commerce and exacerbate skills shortages across the country.
Sydney’s lockdown is costing roughly A$1 billion a week according to AMP Capital economist Shane Oliver, with a similar figure attached to Victoria for their recent hard lockdown also. JPMorgan economist Ben Jarman cut his September quarter GDP growth forecast by 0.5 of a percentage point to just 0.25 percent. The estimate aligns with other forecasts, economists at Citi and Morgan Stanley projected the cost of the Sydney shutdown at A$2 billion, or 0.1 percent of nominal annual GDP.
“While we know that the Australian economy is in good shape, we also know that recent lockdowns have taken their toll on customers and the recovery can be slow. Customers can rest assured that if they need help, they will get it. Your bank will help you find a way through, don’t tough it out on your own” commented Australian Banking Association CEO Anna Bligh.
“We know that many small business owners have been affected, and this financial support will assist with covering ongoing business expenses, like rent and wages, until it is safe to re-open the doors again” said Westpac Group’s Chief Executive, Consumer & Business Banking, Chris de Bruin.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Bruce Billson, welcomed the support and encouraged all small business owners who are experiencing financial difficulties to call their banks to make the necessary arrangements.
“The banks’ commitment to support small businesses through this period is highly valued and is the kind of a key support element that could be incorporated into an agreed predictable and known national framework of support. Such a framework, involving both government and private sector elements, step up as COVID-inspired economic constraints and introduced, up-levelled or extended that small and family businesses can count on when seeking to navigate these challenging and uncertain times” Mr Billson stated.