Features

The long road to business recovery

- July 6, 2020 3 MIN READ

The new financial year is here and after months of turmoil, only now are we starting to get a true picture of the impact this has had on Australian small businesses and the significant pain points that lie ahead, writes Australian Small Business and Family Enterprise Ombudsman Kate Carnell.

Prolonged drought conditions, a horror bushfire season and a global pandemic – all contributing to the worst economic conditions we have seen since the great depression.

Australia is now in recession and small businesses that were strong and viable just a few months ago, are now fighting to get back on their feet. There really has never been a tougher time to be in business.

ABS data tells us 900,000 businesses are getting JobKeeper payments and about 690,000 businesses have received emergency cash flow assistance from the government, while 38% of businesses still trading have renegotiated their rent arrangements.

Close to 1.6 million people have been stood down or are working fewer hours.

Sadly, ABS data tells us about 200,000 small businesses stopped trading in response to the crisis by the time JobKeeper was announced. We know that figure could have been much worse if the Government hadn’t introduced JobKeeper.

Two-thirds of businesses were still reporting reduced revenue in June. Of those businesses, about a third were reporting revenue losses of 50% or more.

ABS figures clearly show cash flow remains a huge issue for small businesses with most shop front businesses  such as cafés, gyms and hairdressers only holding enough cash to cover a month or two of expenses. The Grattan Institute’s newly released report The Recovery Book points out that even with government support, many small businesses will soon be reaching the end of their buffers and the next six months will be a ‘high-risk period for insolvencies’.

Add to that the recent outbreak in Victoria and the subsequent lockdown of several hotspots, has seen many small businesses impacted. It just shows that the road to recovery won’t necessarily be smooth.

We know that the decisions the government makes over the coming months will be critical to the small business sector in Australia. If things go according to the government’s schedule, more than $65 billion in income support in the September will end by October. In addition to JobKeeper ending, the costs of doing business will return as loan deferrals and rent relief agreements expire at the same time.

That’s why my office has produced a comprehensive COVID-19 Recovery Plan recommending a suite of reforms to help small businesses survive and thrive in these significantly challenging trading conditions.

Our Recovery Plan aims to restart the Australian economy by getting people back to work and building economic confidence – after all, small business is the cornerstone of economic activity, employing more than half the workforce.

The recommendations cover a broad range of areas including taxation, access to justice, industrial relations, government procurement and cutting red tape.

Copies of the plan have been sent to the federal government and I recently appeared before a Senate Select Committee on COVID-19, expanding on various aspects of the plan in addition to the need for an extension of support to small businesses in industries hit hardest by restrictions. I also spoke about the importance of affordable childcare for small business owners who are working long hours to get their businesses back up and running.

On the issue of childcare, now is the time for the government to be considering innovative ways to increase workforce participation rates, to ensure productivity gains. According to the Grattan Institute, an expanded subsidy scheme would deliver an estimated $11 billion boost to the economy.

Ultimately, it’s all about getting a framework in place that provides essential support for Australian small businesses, which will be driving the economic recovery as we emerge from this crisis.

Kate Carnell is one of our Small Business First Champions. You can find out more about Small Business First here.

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