Five point plan to prevent a hard landing post-lockdown

Content Summary

Author: Andrew Hunter, Chief Executive Officer, CPA Australia

Not before time, Australia has a national plan for business support during significant lockdowns. Now our governments must develop a support plan for the period immediately afterwards.
The business support payments announced last week – the Commonwealth will fund 50 per cent if the state or territory government funds the other half – cease when restrictions are eased or the location is no longer a Commonwealth hotspot.

Business losses, on the other hand, don’t magically stop the moment a government calls time on a lockdown. Orders, bookings and customers return over weeks, if not months, especially as certain restrictions often remain.

I need look no further than the Melbourne CBD to know that mask wearing indoors is a significant deterrent to attending the office. While it’s in place, very few people attend in person.

I understand and am very comfortable with people’s choices. But I’m not oblivious to the ripple effect this has on the small businesses surrounding office locations. And nor should the government be.
During lockdowns, businesses are starved of cashflow. To reopen, many need to spend money on stock, for example, restaurants and food. Often, there’s a lag between services being provided and money reaching the till. We need a business support strategy to cover this period.

Since the pandemic began, CPA Australia has participated in hundreds of meetings with governments, our members, industry bodies and business owners. Based on this experience, we’ve identified five measures which have the potential to hasten recovery.

Obviously, there’s nothing like direct financial support. That’s why we’re calling on the government to taper business support payments, rather than end them abruptly.

It’s worth noting that JobKeeper was phased out over a period of months. This enabled businesses to plan their cashflow and wean themselves off this payment. To be clear, we aren’t calling for a return of JobKeeper. JobKeeper was predicated on the need for economic stimulus and it served this purpose well. That’s not what’s called for now.

We’re also not calling for broad-based payments. Instead, we’re suggesting linking eligibility to decline in turnover. This is a good proxy for lockdown losses and can be substantiated. It would ensure that the businesses which require public support, receive it.

This is not a handout; far from it. Lockdowns are important public health measures. At the same time, they deny or reduce a small business owner’s ability to earn an income. As such, these people bear the brunt of the economic costs of lockdowns in a way few other parts of the economy do.

Governments themselves make regular calls on businesses’ cashflow, in the form of fees, charges and taxes. Giving with one hand while taking with the other can be counterproductive in periods of lockdown. Equally, when a lockdown ends is not the time to seek payment of government fees and charges.

So, in addition to direct support, we’re asking Commonwealth and state or territory governments to respect the moment and press pause on revenue collection and compliance activities for a couple of weeks.

We’re not asking them to waive these amounts. We’re also not calling for extended or indefinite support payments and deferrals. And we don’t think it’s appropriate to prop up businesses that are no longer viable. We’re just asking for some breathing room.

Indirect support, such as consumer incentives like dining, travel and accommodation vouchers, and subsidies to enable business owners to seek professional advice are an important adjunct to a “whole-of-business” post-lockdown support plan.

Our proposed package of business supports involves responsibilities which sit with different levels of government. Enacting them will require a high level of political cooperation. Out of respect for the contribution small businesses make to Australia’s economy, we expect nothing less.

There’s a reason the cliché about small businesses being the “engine room of the Australian economy” is tossed about freely. Small businesses account for around 98 per cent of all Australian businesses. They employ around 40 per cent of the nation’s workforce and contribute a little over one-third of total GDP.

They are not household names. Chances are, the person serving you at the counter, or the person posting out your online order, is the business owner. Yes, big businesses feel the pain of lockdowns too. But they have a much greater capacity to withstand threats and secure finance.

Often the only way for a small business to raise capital is for its owner to turn out their pockets. After 18 months of rolling lockdowns, many of them are fully tapped. So, it is appropriate to distinguish between businesses based on size and to provide additional support to small-to-medium enterprises.

Ultimately, the number one business support strategy Australia needs is a successful vaccine roll out. Until such time, business will face rolling disruptions caused by lockdowns. If the Federal Government acts quickly, we could have business supports in place for when current lockdowns end and before future ones begin.