The government stimulus has created somewhat of a false economy with the aim of propping up business throughout COVID. So what is likely to happen in our local region as this stimulus comes to an end and what do you need to be doing in your own business to protect yourself.
Both Federal and State Government have eased the burden of COVID on business by providing stimulus including:
- Jobkeeper 1 and now Jobkeeper 2
- Cash Flow Boost based on PAYGW paid
- Increased Jobseeker for those out of work
- Apprentice subsidies
- ATO deferral of payments and remission of interest on debts owed
- State Payroll Tax refunds and deferrals
- Low or no interest Loan from the State Government
- Building Boost for those constructing new homes or undertaking substantial renovations
The Federal Budget has also delivered individual tax cuts of$1000-2500 depending on taxable income and the new Jobmaker scheme to assist the unemployed back into work as the economy recovers.
So where has this all left business in Mackay region?
Retail – Obviously hospitality and tourism have been hurting but are now just starting on their recovery now that restrictions are starting to be eased. There has been a definite shift towards online transactions with predictions that over 15% of retail transactions will occur online by December 2020 – this is hurting traditional retailers stuck paying significant rent on reduced sales, with overall retail sales down by 8% since COVID commenced. There are pockets of discretionary spend retailers who are doing very well in the areas of health and fitness where they have been able to continue to trade (eg golf, cycling, boating) and home renovation as people in lockdown and working remotely finally get around to those projects they have been putting off for years.
Building and Construction Industry – please click here to read Melinda’s article on what’s happening in this industry
Mining and Mining Services – please click here to read Richo’s article on what’s happening in this industry
So what do we see happening over the next year or so?
- The Government has set the scene for a recovery by propping up business through the worst times and putting more money in people’s pockets to help boost spending through the recovery……and not increasing tax rates which would have demotivated business owners.
- We expect the Building Trades to have a sustained period of growth until about the middle of 2021 but given that so much building activity has been brought forward by the building boost, we expect the second half of 2021 to be slow.
- Mining and Mining Services – the reduction in the coal price since COVID leads us to be quite cautious about the prospects of the mining industry. Recent spikes in the coal price are encouraging but given that the rest of the world doesn’t seem to be coping with COVID as well as Australia, we think demand will be skinny and this could affect the coal price negatively in the medium term. And given what a massive impact the volatility of the coal price and related lack of confidence has on our local area, we would advise to watch the coal price closely and be prepared to react as necessary.
These key drivers of our local economy should mean the remainder of 2020 and the first half of 2021 should be pretty good for most business owners but we are more cautious about our local economy for the second half of 2021 and beyond at this stage.
So what should business owners be doing right now?
- Take the lessons you have learnt during COVID about how to operate more efficiently and economically and make these long term changes to your business to make your business more healthy
- Stay on top of your debts – the Governments have provided deferrals to help cope with COVID as have the banks, but at some stage they are coming looking for what you owe – be prepared
- Know your numbers and review these regularly including seeking the advice of your accountant if you are unsure
- Have a good look at your staff numbers, particularly if you have been propped up by Jobkeeper, and ensure you match the staff required to your current turnover levels.
- Stay in regular contact with your accountant and other business advisors so that you know what is going on and what benefits you are entitled to – now is not the time for surprises
- Where you have benefited from the Government stimulus or otherwise prospered through COVID, put some funds aside for a rainy day by reducing debt or setting funds aside in a separate bank account
- Look for opportunities in your market to develop a secondary income stream for your business, diversify or take advantage of a hole in the market created by other businesses not surviving.