Kicking the can down the road

Self-employed borrowers are the ones hurting the most as the nation’s two largest economies remain in lockdown, according to Theo Chambers. The CEO of top Sydney brokerage Shore Financial spoke to MPA at a time when construction across greater Sydney was banned and South Australia was preparing to join Sydney and Melbourne in lockdown. Since then, Southeast Qld has locked down, SA has opened up, and Victoria has reentered lockdown after nine days of no stay-at-home orders brought a handful of “mystery cases” to the fore.

While state and federal governments have introduced and adjusted various business support for those impacted by the restrictions, small businesses affected by these lockdowns are still suffering – and it’s not just those in non-essential retail or construction that are feeling the brunt, said Chambers.

“When the construction industry gets hurt then all the supplementary industries get hurt with it,” he said. “Same as retail. We’ve got clients in wholesaling for food and alcohol and when restaurants are shut their business gets hurt because they are supplying the restaurants.”

While the greater Sydney ban on construction has since tapered to a ban on construction in the city’s eight LGAs of most concern, a survey of members by the Master Builders Association has shown that two-thirds of construction companies experienced more than a 50% drop in work in the week the sector reopened. A survey by the Urban Development Institute of Australia revealed that one-third of Sydney’s construction sites remained closed and that open sites are operating at 50% capacity.

Throughout the nation’s most recent string of lockdowns, banks have announced support for impacted customers, including overdrafts for small businesses and the extension of moratoriums on home loan foreclosures. But while pausing repayments or having access to more finance will help many who are impacted, it will also increase their debt obligations, said Chambers. This also applies to the government stimulus that has been brought out.

Read more: Thousands of mortgages deferred as Sydney lockdown drags on

According to the Australian Banking Association, banks have deferred repayments on 14,500 mortgages due to the ongoing COVID-19 lockdowns. While this amount is lower than during last year’s nationwide lockdown, numbers are rising rapidly.

“The country is getting into debt to fuel growth which has implications,” he said. “In the US, inflation has gone through the roof on this quantitative easing we’re doing right now.

“Some businesses get hurt permanently from these things (lockdown restrictions) and the ripple on effect from people having to eat into savings during times like this to pay the extra rent or pay for expenses while no income is coming in - it really hurts the self-employed business earners the most.

“I feel like it’s kicking the can down the road of a bigger global economic problem that might arise of this debt crisis that a lot of people talk about.”