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Recovery falters just a month after JobKeeper ends
The end of JobKeeper has seen a rise in defaults and administrations, which could hamper Australia’s recovery from the COVID-19 downturn, new research has revealed.
Recovery falters just a month after JobKeeper ends
The end of JobKeeper has seen a rise in defaults and administrations, which could hamper Australia’s recovery from the COVID-19 downturn, new research has revealed.
Data released by CreditorWatch showed that credit defaults rose by 9 per cent in May when compared with the three months to February, while external administration added 24 per cent over the last three months.
SMEs may be starting to struggle more in a post-JobKeeper environment than was expected earlier in the year, the data showed.
“We’ve been saying for some time we won’t be able to get a true picture of the economic health of the nation until federal government stimulus measures, such as JobKeeper, have ended and their impact has stopped artificially propping up some businesses,” said Mr Patrick Coghlan, CEO, CreditorWatch.
The number of days business payments are overdue totally blew out in May, with the average number of days behind stretching out to 70 days. The average in recent years prior to this May result was 29 days. According to CreditorWatch, this is unequivocally the worst economic update for small and medium-sized enterprises (SMEs) in at least six months.
He noted that early signs from the CreditorWatch’s Business Risk Review suggest that there will be a shake-out of poorly performing businesses over the coming two quarters.
However, the report showed that it’s not all doom and gloom throughout the Australian economy.
“Since April last year, defaults have remained 50 per cent lower than pre-COVID figures, largely due to government stimulus support. The focus now will be on next steps to get these numbers back on track to pre-pandemic levels,” CreditorWatch chief economist Harley Dale said.
CreditorWatch’s finding aligns with the Reserve Bank of Australia’s statement for its June monetary policy decision, which indicated the bank is expecting extremely healthy economic growth of 4.75 per cent this year, dropping to GDP growth of 3.5 per cent in 2022.
The unemployment rate is sitting at a relatively benign 5.5 per cent, a figure that’s expected to fall to 5.0 per cent at the end of this year.
One dull spot was a 0.3 per cent drop in company profits following the end of federal government COVID stimulus measures. The question is whether this is a harbinger of further negative news to come.
“We need to be cautious in interpreting brighter results for credit enquiries, external administrations and defaults. We need to see consistent evidence of positive momentum through the remainder of 2021. CreditorWatch analysis suggests the jury is still out on that,” Mr Dale concluded.
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