COVID-19 in Australia: Everything That’s Happened So Far
Australia has seen an upended economy due to COVID-19, causing widespread upheaval to countless families across the continent. The Government estimates over 1.7 million Australians are facing unemployment now due to the crisis, with up to 123,000 signing up for Centrelink benefits.
Whilst there has been a negative impact on the economy, there have been many measures to help Australian households and businesses, and not just by the government. Australian officials have made an effort to provide support to citizens and small businesses. In these times, it is crucial to be aware of what these measures are and to take advantage of them to reduce the financial strain.
We’ll give you a brief rundown of the events of the past month as a way to glimpse into the future.
The RBA Sets Cash Rate at .25%: A Look at an Unconventional Monetary Policy
This is an unprecedented move by the RBA to boost the economy, causing all four big banks to offer a variable rate under 3%. It’s the only time in history that the reserve bank has cut rates twice in less than a month. Even during the GFC, the numbers didn’t slip this low.
This development has made news around the country, though experts are unsure if COVID-19 economic impacts will be solved by a lower cash rate.
This rate cut is an added boost and helps support the housing market. If you have a mortgage, refinancing can help you save thousands with better rates and terms that are more tailored to today’s challenging circumstances. You could also consider consolidating your other debts into your home loan so you can reduce interest rates and get a clearer view of your current finances. However, if you don’t pay down those consolidated accounts, interest over a longer term is more expensive.
Banks Announce Relief Packages to Address Financial Hardship
The Australian government has been making a number of changes to keep its citizens afloat during this difficult time. Government support has led banks to express their willingness to suspend mortgage payments for up to six months (pending a three-month review), a promise that’s largely supported by economists who are looking out for the long-term health of the markets.
In these trying times, over 100,000 customers have applied to pause their mortgage repayments across major lenders. However, it’s important to note that this option should only be taken as a last resort. Be wary of interest rates as this will continue to add up regardless of whether you are on a payment holiday or not. Taking this option may leave you paying more overall with added interest.
Small businesses can also expect to see some help in the form of a relief package, with banks already reaching out to customers to discuss options. The details of these packages have been shared with many individual business owners, and include tax-free payments between $20,000 and $50,000.
Finally, banks are doing more for their customers by announcing new fixed-home loan rates, providing earlier access to term deposits, and waiving common fees for customers. More options are expected to help citizens take control of their finances, so they can choose a path that fits their needs.
The Government Announces $66B Worth of Stimulus Packages
Australians would most likely be relieved to note that there are multiple stimulus packages being offered to businesses, individuals, and households to support them through this period of uncertainty amidst the threat of COVID-19.
- Businesses: Small Medium Enterprise (SME) lenders have been given a 50% guarantee to issue short-term unsecured loans (up to $40 billion) to business owners. So in addition to the relief package payments of up to $100,000, business owners have access to guaranteed loans of up to $250,000 so they can continue to pay their employees as needed.
- Individuals: The eligibility requirements are being expanded so more people can qualify for income support payments, with a one-time coronavirus supplement of $550 every two weeks. This is paid per fortnight to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. The coronavirus supplement will be paid for the next six months at $14.1 billion.
- Households: Households can expect two separate payments of $750 to income support recipients and some concession cardholders (some restrictions apply). In addition, individuals are allowed tax-free access to up to $10,000 worth of their superannuation in this fiscal year and an additional $10,000 the next fiscal year. These will be tax-free and can be availed by those who are eligible for the coronavirus supplement as well as sole traders who may have lost more work hours or experienced a 20 per cent decrease in their income because of the coronavirus.
While the government believes that the global and domestic economic environment has deteriorated, these added measures from the Stimulus packages are expected to help casual workers, sole traders, retirees and those on income support, as well as struggling businesses in the face of the coronavirus.
The Government Is Imposing Restrictions on Non-Essentials
As you already know, public non-essential businesses and organisations have largely been shut-down, with exceptions made for vital services such as banks and grocery stores. As everyone does their part to avoid the spread of coronavirus though, it puts Australia at risk to lose much of the growth that’s been built over the past few decades. This is why the response from above has been so drastic, and why everyone is keen to see businesses back up and running when all this is over.
The economic impact of the coronavirus has brought the Australian dollar to an eleven-year-low, (at time of writing) six per cent lower than early January 2020. Although this would normally be an advantage to exporters, the shutdown in non-essential businesses, disrupted supply chains, and travel bans means there is also a lower demand to purchase non-essential exports.
Considering the rate at which everyone has had to get up to speed on the impact of COVID-19, there are still some kinks to work out. Government, bank, and housing officials are trying to spread the relief out as fairly as possible. The government is doing its best to give more people access to income and household support and even doing early releases of superannuation temporarily.
- Unemployment is expected to impact Australians long after the COVID-19 pandemic is over. There will be a period of restructuring expected when the economy recovers. This is why government wage subsidies like JobKeeper and JobSeeker will come as a welcome respite. Under the JobKeeper payment, ATO will pay $1,500 to businesses per fortnight for every eligible employee for up to 6 months.
- The Jobseeker supplement includes direct payments to those who have lost their jobs due to the coronavirus outbreak. People already receiving income support payments from the government, such as youth allowance or a parenting payment, will be given another $550 a fortnight on top of their regular benefit payment.
- With the surge of unemployment, rental relief is also being offered by the government with a six-month moratorium on evictions for renters. Those who are under Jobseeker payment can also file for rent assistance.
- By 1 May 2020, the government is expected to change the upper social security deeming rate to 2.25 per cent and the lower deeming rate to 0.25 per cent. Your deeming rate refers to the amount the government deems your income to be from your financial assets. A reduced deeming rate means people can get more from their income. Since March 12, the rates have come down by a full .75%, giving recipients an average of $325 more per year. These reductions show the low interest rate environment and its impact on the income from savings.
And while the long-term impact for the tourism, retail, hotel, freight and restaurant industries are estimated to be more severe than other sectors, the economic stress can be offset by the help available. Similarly, the housing rates and loan incentives may just help the housing market recover faster than we think.
Shore Financial: Helping You Come Out Ahead
If you’re feeling overwhelmed by these unpredictable events, you’re certainly not alone. The country may have weathered tough times before, but never before have we seen such a widespread closure of businesses.
Shore Financial understands your stress, which is why we’re here to help. No matter what your financial situation is like at the moment, we’re here to help you find a way through this.
Give us a call today to learn more about what we can do for you during this difficult time.