CreditorWatch comments on what the end of JobKeeper means for the future of Australian businesses
Sunday marks a monumental day in the Australian economic calendar as the federal government’s JobKeeper stimulus is officially being ended. Please find comments below from CreditorWatch Chief Economist Harley Dale and CEO Patrick Coghlan on what this will mean for the future of the Australian business community and the broader economy.
Also below is data from CreditorWatch which lays out the key industries at risk of defaulting on payments in the next few months, as businesses adjust to the removal of government stimulus, as well as looking at which industries have suffered the most insolvencies. Unsurprisingly, the data shows that industries with the most pronounced impact from COVID-19 restrictions suffered the most – Accommodation, Food and Beverage, Retail Trade and Administration Services.
Chief Economist Harley Dale says:
“The end of JobKeeper support will be a difficult but necessary transition. CreditorWatch data has shown that bankruptcies and insolvencies won’t ‘fall off a cliff’ as first anticipated. The number of businesses accessing the JobKeeper payment has fallen quickly as our economy has begun to recover. At the JobKeeper peak in Q2 and Q3 of last year, around one million businesses were receiving the payment, but this number had halved by Q4.
Yes, jobs will be lost and yes businesses will go under – it’s predicted there are between 3,000-5,000 insolvent businesses currently being supported by government stimulus and insolvency legislation. While they won’t all go into administration in the short term, we will start to see a sustained increase in administration over the next 12 months. The long-term effects won’t be as severe as first expected.
We must remember that there is still government support, largely for those industries struggling the most. We have the travel and tourism stimulus package, along with extensions and expansions to the SME Loan Guarantee Scheme and Apprenticeship Wage Subsidy.
These and other policies will still be available for businesses that are viable and need access to finance. The greatest magnitude of uncertainty is that we don’t know how many companies aren’t commercially viable. These businesses are about to be brought to the fore and recovery never happens in a straight line – watch this space.”
CEO Patrick Coghlan says:
“We’ve always known that JobKeeper can’t last forever. The policy has done a sterling job in keeping the Australian economy afloat and the Treasurer should be congratulated for the initiative. However, for our nation to move into the next stage of economic recovery, this lifeline must be switched off.
For those businesses at risk, seeking advice from an independent registered restructuring service or insolvency practitioner will provide the best support. There are several insolvency schemes available yet we have seen little uptake of them. That might all be about to change now.
It’s interesting to see that 46% of businesses expect it to be easy or very easy to meet financial commitments over the next three months, compared to 23% in August 2020. This is because savings are at record highs and late payments are very low for both businesses and consumers due to the surplus of government cash available. The next 3-6 months will be a critical period as the financial buffers are removed and we can see how everyone fares without government help.
The industries most impacted by COVID restrictions last year remain front of mind as those most likely to default on payments as we move through 2021 and we will be monitoring this closely over the next six months.”
Data from CreditorWatch
| Industry | Probability of default | Administrations in January 2021 |
| Accommodation, Food & Beverage Services | 5.82% | 14.06% |
| Administrative and Support Services | 4.77% | 0.52% |
| Agriculture, Forestry and Fishing | 3.07% | 1.04% |
| Arts and Recreation Services | 2.77% | 0.52% |
| Construction | 4.49% | 15.63% |
| Education and Training | 3.84% | 1.04% |
| Electricity, Gas, Water and Waste Services | 3.71% | 0.52% |
| Financial and Insurance Services | 4.21% | 0.52% |
| Health Care and Social Assistance | 2.12% | 1.56% |
| Information Media and Telecommunications | 4.64% | 2.60% |
| Manufacturing | 4.13% | 6.25% |
| Mining | 4.26% | 0.52% |
| Other Services (Beauty salons, Hairdressers, Massage parlours) | 3.69% | 39.06% |
| Professional, Scientific and Technical Services | 4.62% | 1.04% |
| Public Administration and Safety | 4.88% | 0.00% |
| Rental, Hiring and Real Estate Services | 4.18% | 1.04% |
| Retail Trade | 4.51% | 6.25% |
| Transport, Postal and Warehousing | 5.17% | 5.21% |
| Wholesale Trade | 4.07% | 0.52% |
