Thousands of Australian companies are in danger of going under with JobKeeper ready, economists warn.
It is likely that up to 5,000 companies will collapse in the coming months as the end of the wage subsidy also coincides with the temporary moratorium on trading while the insolvent company is dissolved.
Accommodation, food and beverage companies are most at risk of collapse after being hit hard by Covid restrictions, with commercial credit bureau CreditorWatch estimating the industry default probability at 5.82 percent.
The transportation, mail, and storage sector will become the next sector most likely to be severely affected, with an estimated probability of default at 5.17 percent, followed by public administration and security (4.88 percent).
The end of the federal government’s JobKeeper wage subsidy scheme and the lifting of a temporary trade moratorium while insolvent is expected to collapse 3,000 companies in the administration (stock image)
Accommodation, food and beverage companies are most at risk of collapse after being hit hard by Covid restrictions (stock image from an Australian cafe)
Across Australia every year 8,000 companies bring in the trustees, but government support measures during the Covid pandemic have brought that figure down to just 5,000 companies.
‘From a basic arithmetic perspective, we have about 3,000 companies that have not gone into administration as they normally would in a normal trading year, and on top of that, we have companies affected by Covid that simply will not survive due to the conditions in which they fought,’ told CreditorWatch CEO, Patrick Coghlan, news.com.au
“And the current Brisbane incarceration will only put more pressure on those already affected, so there will be a minimum of 3,000 to 5,000.”
Mr Coghlan said that while up to 5,000 companies going into administration seems like a large number, there were dire warnings ‘200,000 companies could potentially go under and now we are in the best scenario’.
He said the end of JobKeeper was necessary for Australia to enter the next phase of economic recovery, boosting consumer and business confidence.
“We are in a fantastic position and these closures just have to happen,” he said.
150,000 people are expected to lose their jobs now that JobKeeper has ended (stock image)
– Accommodation, food and drink (5.82 percent probability of non-payment)
– Transport, mail and storage (5.17 percent)
– Public administration and security (4.88 percent)
– Administrative and support services (4.77 percent)
– Information media and telecommunications (4.64 percent)
– Professional, scientific and technical services (4.62 percent)
– Retail (4.51 percent)
Called in to help workers and businesses in trouble during the worst of the Covid crisis, JobKeeper became a saving grace for more than a million Australians.
The government extended the program twice before finally deciding that it would end on March 28.
Data from the Australian tax office shows that 980,000 employees are still dependent on the program, with NSW and Victoria being the most dependent of the states.
Treasury officials have also added that 150,000 workers will most likely lose their jobs and be forced on benefits.
Despite this, treasurer Josh Frydenberg said Australia’s economic recovery has been stronger than almost anywhere in the world.
“JobKeeper was an economic lifeline that helped keep about a million companies and 3.8 million Australians working at the height of the pandemic,” he said.
“It has achieved its goals to support businesses and save jobs, maintain employment relationships and provide much-needed income support across the country.”
More than 2.8 million employees and 680,000 companies have left JobKeeper during the term of the scheme.
Victoria still has 369,000 people dependent on the scheme, while NSW had 327,000 people relying on it last month.
“Just because JobKeeper is over doesn’t mean the government’s support is,” said Mr Frydenberg.
“Our economic recovery plan will continue to support the economy through targeted support measures, tax cuts, business incentives and record investment in skills, training and infrastructure.”
With the recession over, the number of people on benefits has fallen from 1,319,268 in early 2021 to 1,166,611 a week ago.
The unemployment rate is 5.8 percent.
It’s expected to rise once JobKeeper ends, but it’s unclear how many people will switch to the benefits, now known as JobSeeker, which will also be less generous later in the week when the coronavirus supplement ends.
Official estimates put the loss of employment in the range of 100,000 to 150,000.