500,000 jobs are forecast to go in pandemic impact

MORE than 100,000 small businesses are likely to close nationally in the fallout from the coronavirus pandemic, costing about 500,000 jobs, an industry group has forecast.

And Australia is careering towards the deepest recession since the Great Depression as the outbreak intensifies, according to separate research by investment bank Goldman Sachs.

The warnings come as the major banks unveil sweeping support programs for small businesses, intended to shepherd those on the brink through the worst of the pandemic.

Council of Small Business of Australia chief Peter Strong said the group was expecting 120,000 small and mediumsized businesses – those with annual turnovers up to $50 million – to close as the virus up-ended the economy.

That means one in about every seven would close.

About 500,000 people employed in the sector, or one in every 10, were expected to lose their jobs, Mr Strong said.

The industry group had based those forecasts on feedback from stakeholders including the Business Council of Australia and the Australian Banking Association, he said.

Tim Piper, Victoria director for the Australian Industry Group, said there was significant apprehension among small businesses because of the uncertainty in the outlook.

Customer numbers had been hit particularly hard in the services sector, he said.

Mr Strong said his group expected the pandemic was “something that will be over in a year … but in-between time, the impact is going to be horrendous”.

He hailed the assistance programs announced by the banks as extraordinary, saying that without such extensive support, the group’s forecasts on closures and job losses were likely “optimistic”.

The cornerstone is a pledge to let ailing small businesses defer loan repayments for up to six months.

Australian Banking Association chief Anna Bligh said the relief package would apply to more than $100 billion worth of loans to small businesses.

Depending on the take-up, it “could put as much as $8 billion back into the pockets of small businesses as they battle through”, Ms Bligh said.

BUT FOR THOSE THAT THOUGHT THEY COULDN’T LAST … THIS GIVES THEM THE OPPORTUNITY TO REWRITE THE BUSINESS PLAN AND STAY OPEN PETER STRONG

All four major banks announced a series of separate measures, including significant cuts to variable-rate loans to small business.

Mr Strong said such support measures couldn’t “replace customers coming in”.

“But for those (businesses) that thought they couldn’t last … this gives them the opportunity to rewrite the business plan and stay open,” he said.

A team of analysts led by Goldman Sachs Australia chief economist Andrew Boak forecast Australia’s economy would shrink dramatically this year.

Averaged across 2020, GDP was likely to contract 6 per cent from last year, they said in a research report for investors.

“This represents the sharpest annual GDP contraction since the Great Depression,” they said.