Small business owners are being told to “think of your family” and reduce staff numbers to get through the coronavirus crisis amid predictions of record bankruptcies and company failures in the next two years.
A confidential briefing document compiled by the Council of Small Business Organisations Australia — to be shared with stakeholders at a roundtable on Friday — predicts unemployment will reach more than 10 per cent.
With more initiatives on social distancing expected, COSBOA chief executive Peter Strong said many businesses would fail to get through the winter. “They have taken a cashflow hit already and you still have costs. It is as though you have opened: you have got the wages, you have got the rent but you have no money,” he said.
“Our advice at the moment to businesses is that you have to think of your family.
“A lot of businesses don’t want to put staff off, but we are saying: ‘You have got no choice’.”
COSBOA scenario modelling drafted after consultation with its members predicts small businesses will have to terminate staff over the next six months as the government restricts the movement of people. “Casual staff will be hit the hardest as their employment will cease almost immediately,” the document says.
“Few have the cash reserves to meet their bills, rent, wages, utilities, supplies, taxes and fees, for more than a few weeks. Those that can will extend their overdrafts and mortgages.”
The document says there will be increased small business closures in the next six to 12 months, with the economy failing to recover by 2022.
“In the next 24 months, there will likely be record bankruptcies and companies going into administration and stress due to debt,” the briefing says. “The sharemarket has not recovered (by 2022), and employment reached 1990s levels … Interest rates remain historically low. Economic growth has stalled.”
CBA chief economist Michael Blythe was less bleak, declaring Australia was a “long way from an early 1990s-style recession”.
“Policymakers are on the job and they’ve taken the lesson from the GFC that if you are trying to head off these sorts of negative impacts, then you go hard,” he said.
However, Mr Blythe said “from an economic perspective, it’s harder not to become more pessimistic day by day”.
“We are flying blind in the sense we have never seen anything like this so don’t know how long it will last … The longer it goes on, the bigger impact it is going to have,” he said.
NAB chief economist Alan Oster said he expected the unemployment rate to rise to 5.75 per cent in coming months, from 5.3 per cent in January.
The Australian Bureau of Statistics will release employment figures for February on Thursday.