Despite some positive indicators, chief economist says it's too early to know
CreditorWatch’s Business Risk Review for April has painted a mostly positive picture regarding the health of Australian businesses following the end of JobKeeper, but while there have been solid reductions in external administrations and defaults, it will still be some time before we get a true understanding of how the economy is faring, according to chief economist Harley Dale.
“I think, overall, the results vindicate what CreditorWatch has been saying for at least six months, that once JobKeeper ended on March 28 we weren’t going to see the business community fall over a cliff,” he told MPA. “We just need a little bit more to reinforce the broadly expected outcome that people have - that the economy will continue to fare better than anybody thought it would through most of 2020 when we were looking towards 2021.”
The reason it is now too early to say how the economy will fare is twofold, he said. The first thing to consider is that April 2020 was the first month Australia got a good understanding of just how badly the pandemic could affect us.
Read more: Risk to small business still significant
“We had a pretty good idea as late February and March rolled on, but in terms of a full month, it took till April before we went, heck, we might have a bit of an issue here,” he said. “We’re comparing April with April.
“The second thing is, it was such an unprecedented economic social mental shock to everybody that, yes, we should celebrate the good sides of any points of data, but to take just one month’s worth of data after all we’ve been through just isn’t enough.
“We need to look at the May and June results and we probably need a September quarter result as well to compare to last year.”
Despite it being early days yet, the numbers revealed so far have been very positive. One of the standout results from CreditorWatch’s Risk Review was the fact that external administrations fell by 34% when compared to the same time last year.
Read next: Data shows more SMEs relied on non-banks during COVID
“To see a situation in April where external administrations are actually lower than they were a year earlier is very encouraging,” said Dale. “I think we need to be aware that April was the first full month last year where, as an economy, we got some kind of a take on the full adverse impacts of the pandemic, so that fall is maybe a little bit exaggerated by the high base that it’s coming from.
“But even allowing for that, it’s a very encouraging result - that you’ve got a number that is down rather than a number that is up for April 2021.”
Kate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.Email | LinkedIn
