Almost a million businesses could be forced to close over the next three months, leaving 20 per cent of Australians on the dole by Christmas, worst-case scenario modelling predicts.
Some 35 per cent of small businesses will find it hard to meet financial commitments between now and December due to the coronavirus-caused recession, according to a government survey.
This equates to about 810,000 of the 2.3million small businesses across Australia.
Almost a million businesses could be forced to close over the next three months, according to grim modelling. Pictured: A closed shop in Melbourne
Some 35 per cent of small businesses said they will find it hard to meet financial commitments between now and December. Pictured: Melbourne residents wearing masks
If all these companies go under then approximately 1.7million jobs will be lost, based on the fact that each small company employs an average of 2.1 people.
With one million Australians already unemployed, the number on the dole could hit 2.7million, according to the modelling by free-market think tank The Institute of Public Affairs.
This could cause the official unemployment rate to rise from 7.5 per cent to as high as 20 per cent.
Australia’s economy has been hammered by coronavirus restrictions and plunged a record seven per cent the June quarter.
Victoria’s second-wave lockdown, which is expected to last until October 26, has put about 400,000 people out of work.
The situation would be worse except for the federal government’s JobKeeper scheme, which is estimated to have saved 700,000 jobs across the nation since March.
The number on the dole could hit 2.7million, according to a think tank. Pictured: Degraves Street in Melbourne lies empty
Australia’s economy has been hammered by coronavirus restrictions and plunged a record seven per cent the June quarter. Pictured: Melbourne residents wearing masks
IPA Research Fellow Kurt Wallace said: ‘The lockdown measures are smashing small businesses and jobs across Australia, many of which will never return.
‘Small businesses embody the dignity of work, aspiration, resilience, community, and reward for hard work and merit. They are the very core of the Australian way of life.’
There is also pressure on the housing market, with the Reserve Bank of Australia predicting that a 40 per cent plunge in house prices is plausible.
In March, 900,000 home and business borrowers were given six-month mortgage repayment holidays as Covid-19 trading restrictions kicked in.
National Australia Bank chief executive Ross McEwan last month suggested home borrowers who couldn’t repay their loans should consider selling their house.
On Wednesday Australia officially sunk into recession for the first time in almost 30 years.
On an annual basis, the economy shrunk by 6.3 per cent – a level unseen since the aftermath of World War II in 1945 when the troops returned home.
The national accounts data confirmed a technical recession for the first time since mid-1991, following a 0.3 per cent decline in gross domestic product during the March quarter.
On an annual basis, the economy shrunk by 6.3 per cent. The June quarterly slump was an worse than the 1930s Great Depression while the annual decline at a level unseen since the aftermath of World War II in 1945
A recession is defined as two consecutive quarters of GDP contraction and the last time Australia suffered one, mobile phones were the size of bricks and the internet was an American university research project.
The downturn experienced in 2020 is at a level unseen since the early days of radio and before television, with the quarterly economic plunge worse than some months of the early 1930s.
The seven per cent downturn in just three months was the equivalent of two-and-a-half years of economic growth, between March 2017 and December 2019, before the coronavirus pandemic.
The ABS’s head of national accounts Michael Smedes said the pandemic had caused the worst economic slump since quarterly economic records began in 1959.
How are the support payments changing from September?
* The elevated unemployment benefit will remain at $1,115.70 a fortnight until September 24
* From the next day until the end of the year the $550 coronavirus supplement will be cut to $250, taking overall fortnightly dole payments down to $815.70
* People will be able to earn up to $300 without having their payment reduced
* The mutual obligation rules requiring people to search for four jobs a month will restart on August 4
* Penalties for people refusing a job offer will be reintroduced
* Job search requirements will increase in September when the assets test will also return
* On 31 December the supplement is due to end. The permanent JobSeeker rate to take effect from January next year will be announced in the October 6 budget.
* The $1,500 fortnightly wage subsidy will continue until September 27
* From the end of September to January, JobKeeper will be reduced to $1,200 for full-time workers and $750 for people working 20 hours or less
* From January to March, the full-time rate will be $1,000 and part-time will reduce to $650
* Businesses turning over less than $1 billion will have to requalify for the program at both stages through showing a 30 per cent drop in revenue
* Businesses with more than $1billion in turnover have to demonstrate a 50 per cent fall