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These days, around 173 countries across the world are engaged in a battle, not with each other, but against the coronavirus contagion. Unitedly, they are fighting a war against this disease that has claimed lives of ~21,000 people worldwide in just three months. Undoubtedly, they cannot afford to lose this wartime.
Much like other countries, Australia is also facing an accelerating number of coronavirus cases, with the growth in the rate of community transmission. The continuation of the spread of COVID-19 at the same pace might result in harsh economic effects. Certainly, businesses and households are likely to suffer a major blow to their incomes if the situation persists.
However, with government and policymakers putting their best in building the bridge to economic recovery, the only way to successfully cope with the coronavirus crisis is “Stay Positive”.
Household Wealth Jumps Ahead of Coronavirus Pandemic
The ABS has recently reported a surge of 3.3 per cent or $360.9 billion in total household wealth to a record high of $11,309 billion during the December 2019 quarter. This was the highest quarterly growth in household wealth in the last 10 years, which induced a recovery in through the year growth from the negative results observed in 2018-19.
Household wealth soared by 10.2 per cent in 2019, supported by a rise of 8.6 per cent in household wealth per person through the year relative to a population growth of 1.5 per cent.
The optimistic household wealth outcome for the quarter was largely driven by real holding gains on residential real estate.
To recall, the ABS announced an increase of 3.9 per cent in residential housing prices during the December 2019 quarter, which indicated strong real holding gains on residential real estate. As per the ABS, this was the most robust real holding gain on residential real estate seen since 2009 December.
The latest data also revealed that average household wealth per person or household wealth per capita improved by $12,809 to $442,705 during the period, marking the strongest rise since December 2009 quarter.
It is worth mentioning that Australia remained the net lender for the third consecutive quarter; however, there was a slowdown in national net lending from $3.1 billion in Q3 2019 to $1.7 billion in Q4 2019. Also, the nation’s net lending position fell considerably from $6.3 billion to $0.8 billion, mainly due to a decline of $4.5 billion in national net saving.
According to the ABS, the nation’s household saving ratio fell from $10.7 billion to $1.4 billion in Q4 2019, backed by a fall in gross disposable income and partially offset by a rise in consumption of fixed capital and final consumption expenditure.
The Australian households concluded the decade with favourable levels of wealth, with no notable impact seen from the devastating bushfires on wealth statistics. However, this might not continue in the March 2020 quarter as coronavirus crisis has already resulted in massive job losses and closure of businesses.
Businesses Began to See Impact of Coronavirus in March
The ABS has recently revealed the initial outcomes of survey “Business Impacts of COVID-19”, which have highlighted considerable impacts on Australian businesses operating in mid-March 2020.
The results showed that around half (49 per cent) of the surveyed Australian businesses observed a negative impact of coronavirus pandemic during mid-March, while 86 per cent are likely to be affected in the coming months.
Businesses engaged in Accommodation & food services witnessed the most adverse impacts, with 78 per cent already noting effects and 96 per cent expecting impacts in future months. During the collection period, the following businesses were the least to be affected by the pandemic:
- Mining (37 per cent)
- Electricity, gas and water supply (34 per cent)
- Scientific & technical services (21 per cent)
The survey results highlighted that the most common impact of COVID-19 recorded during the period was a reduction in local demand (82 per cent) and is expected to remain the most popular one in the coming months (81 per cent).
More than one-third of the impacted businesses saw experienced staff shortages, while 59 per cent anticipate observing it in the coming months.
Stay Calm: Government is Doing its Part
The Australian government is functioning actively to support businesses from the harsh economic consequences of the COVID-19 pandemic.
As a part of its collective $189 billion stimulus package, it is providing up to $100k to eligible medium and small-sized companies and not-for-profits (NFPs) with a minimum payment of $20k. These payments will offer cash flow support to NFPs and businesses, so that they can pay their electricity bills, rent and other debts, retain staff and keep operating.
Interesting Read: Fiscal Stimulus In Full Swing; PM Unleashes Another $66b, Room For More
Moreover, for providing a relief to financially distressed businesses, the government has temporarily raised:
- the threshold at which lenders can issue a statutory demand on a firm and to begin bankruptcy proceedings against a person; and
- the time individuals and companies have, to respond to statutory demands they receive.
The federal government has also improved the instant asset write-off threshold to $150k from $30k and enlarged access to incorporate businesses with a combined annual turnover of not more than $500 million until 30 June 2020. In addition, the government has launched a time-limited 15-month investment incentive to support economic growth and business investment over the short term.
The government is also supporting up to 70,000 small businesses, retain their trainees and apprentices. Besides these measures, the government has decided to keep aside $1 billion to offer support to regions most considerably impacted by the outbreak.
Apart from the federal government, to aid businesses, the RBA has also set up a term funding facility worth $90 billion to particularly support its small-business customers. Under the scheme, the banks can borrow around 3 per cent of their current outstanding credit to households and businesses, with access to extra funds if they offer further support to SMEs.
With the spread of coronavirus expected to be more prolonged, the government and the RBA are going great lengths to provide timely support to affected businesses, workers and the broader community. Trusting their actions and staying calm can help households and businesses emerge from this crisis strongly.
Also Read: COVID-19 Pandemic: An Economic Emergency to be Dealt With
