Uncertainty For Businesses Because of Covid
The effects of covid-19 on the economy and businesses have been seen worldwide, including in Australia. Though the pandemic is fading thanks to the vaccines after two years, the uncertainty continues. Similar to other countries, the economic uncertainty can prove to be costly for Australian citizens as well as the Government. Since the economic certainty between the different countries is linked due to trade, there is no concrete answer as to when the uncertainty will leave the picture.
Shifting Consumer Habits
The longer the pandemic continues, the tighter the consumers hold onto their money and the less they seem willing to spend it. According to a local news report, consumers spend less than they once did on food and other necessities. The spending habits on non-essentials have changed even more.
As mentioned previously, many of these decreased spending habits may result from the shipment challenges faced globally. Many consumers who rely on special food items sourced from outside Australia might have faced great difficulty in finding local alternatives. Most of these food items could be culturally or ethnically important. The consumers of these imported food items may have resorted to making these culturally important foods at home.
Moreover, shopping online from global e-commerce websites is also common. Consumers from the lower class and lower middle class especially rely on cheap e-commerce websites for their needs. Many small businesses in Australia also import their goods from similar websites to sell locally. The impact of global shipment challenges due to the covid-19 pandemic also impacted these Australian businesses and their customers.
Overall, consumer habits have shifted in parallel to the coronavirus situation in the continent. Greater control over the spread of coronavirus has resulted in greater economic growth and vice versa.
So what did it all mean for businesses and business owners?
Effect of Covid on Businesses in Austalia
According to the Australian Bureau of Statistics, 82% of Australian businesses reported an impact in demand in the first month of covid-19 lockdowns, i.e., March 2020. Out of these, 78% of businesses in food, accommodation, and hospitality services reported a severe negative impact of covid. The severe negative impact of covid-19 on Australian businesses forced about 45% of businesses to terminate at least 40 employees.
During the second quarter of the year 2020, which was also the first quarter of the covid-19 pandemic, about 58% of businesses reported impact to the extent where recovery seemed difficult. Overall, the percentage of businesses that saw the least impact was about 22% of all Australian businesses.
There was an overall 80% reduced demand by local consumers compared to the 35% staff shortage and a similar percentage of reduced supply in materials. The average increase in the coming two years of this drastic impact only lowered by one per cent, including the current economic growth. As of February 2022, the percentage of businesses that saw a reduced demand has reduced to 23%, which is under a quarter of businesses.
Financial Difficulty Due to Covid
Another interesting aspect of the impact of covid on businesses was how large businesses suffered more than small businesses throughout the pandemic. Since many large businesses rely on importing some raw material from other countries, the statistical fact that they suffered more can be understood.
For example, another recent statistical data by the Australian Bureau of Statistics revealed that only twelve per cent of small businesses sought outsourced funding during the last quarter. On the other hand, about sixteen per cent of large businesses sought investors and stakeholders for funding.
The Fear of Uncertainty
While Australian businesses are slowly coping with the damage caused by the covid-19 pandemic, the economic experts believe that consumers are not looking to spend and the stakeholders aren’t looking to invest much until the covid-19 uncertainty has fully disappeared. A 2016 research from the Reserve Bank of Australia also suggested that uncertain economic situations urge households to conserve and save. Many middle and lower-income households who rely on paychecks to pay rent and bills can especially become cautious about spending more than necessary.
The duration of the global covid-19 pandemic can also be blamed for the highly cautious behaviour of consumers. While science has never confirmed how many days it can take to build a habit, it can be assumed that anyone can form a habit in sometime less than two years. Though several consumers are spending money on what they love to make up for the past two years, the closing of many businesses in the covid-19 pandemic, the still-struggling economy, and the vaccine mandates for workers can take a while to get the businesses back on their feet.
Australian Government aims to spend over $200 billion to pull the Australian economy from the effects of the covid-19 pandemic. However, the economic recovery depends largely on controlling the virus.
If You Are a Business Owner…
You can use the services offered by the Australian Government to support the business. Small business owners can seek government help for several issues. Medium to large scale businesses can also apply for help. Moreover, indigenous businesses can also seek assistance.
These government support programs also offer help to specific industries and guidelines to business owners to continue their business in times of continued uncertainty. The official website of the support program for businesses during the covid-19 pandemic also offers answers to frequently asked questions, guidelines for business resources, and training.
You can also seek financial advice from Bankruptcy Advisory Centre to find out how the Government programs can help you, more ways to keep your business afloat or close it with as little loss as possible. Bankruptcy Advisory Centre provides free, no-obligation chat to all callers.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
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