Australian Economy & Business Finally Turns A Corner
Despite the hit COVID-19 has taken on businesses throughout Australia, the transition into 2021 has seen a tremendous increase in business growth and economic news around. From extending Government schemes to continue supporting companies on JobKeeper to a rise in employment rate, we are confident that Australia has safely turned a corner since lockdown and successfully resumed its ever-growing economic prosperity. Find out more about what our experts at Rateseeker have had to say about these significant business updates.
Government makes it easier for businesses to get financial assistance
While online businesses have prospered throughout lockdown and after, most continue to struggle to maintain and grow as a company. This mainly includes small companies or corporations currently on JobKeeper, which ends March 28. In response, the federal government has expanded and extended its SME Loan Guarantee Scheme, a program designed to support these firms who currently rely on JobKeeper to help their employees and continue running business operations. The SME Recovery Loan Scheme will work with lenders, ensuring that all eligible business has access to enough funding to grow their business even after JobKeeper finishes. The scheme also encourages lenders to provide cheaper credit, allowing viable SMEs to gain additional and necessary finances to ease through the impact of COVID-19, recover and adequately invest for the future.
Under this new scheme, eligible businesses apply for the loan by guaranteeing 80% of the loan, which is a considerable increase from the original 50% of the grant. Companies will also reap the benefits of the other following scheme enhancements, including:
- Increased maximum loan size from $1 million to $5 million
- Increased loan term from 5 years to 10 years
- Increased turnover of businesses from $50 million to $250 million
What can eligible businesses expect?
If deemed eligible, businesses will be able to use the scheme to refinance their existing loans and successfully maintain their business operations and keep running as they prepare to move off JobKeeper.
The new interest rate on loans still be determined by lenders, but with a slight difference. Instead, interest rates on loans will be capped at 7.50%, with enough flexibility for variable rates to increase in line with the current market rates. The scheme also allows loans to be either unsecured or secured and enable lenders to offer eligible borrowers a repayment holiday of up to 24 months.
Job numbers bounce back
This is probably the best news Rateseeker seen yet! According to the Australian Bureau of Statistics, there are now more Australians in the workforce since the Coronavirus pandemic.
In March 2020, when the government had declared the country in lockdown, the Australian Bureau of Statistics recorded that 13,003,300 people were ‘in work’. By the end of February 2021, there were 13,006,900 people in the Australian workforce, meaning an unprecedented 3,600 job increase. While between March and May 2020, we saw a total of 872,000 jobs lost, employment has bounced back incredibly since then.
That being said, we aren’t entirely out of the woods yet.
Unemployment for February 2021 was higher than in March 2020. February sits at a significant 5.8% versus the 5.2% of March.
Why? While there has been a remarkable 3,600 increase in jobs, there are at least 78,300 more Australians in the workforce than the year prior. Up to 53% of employment lost due to the COVID-19 pandemic has successfully been regained. Around 69% of those who had to leave the labour market have re-entered again. Nevertheless, as AMP Capital senior economist Diana Mousina, states, “There is still a long way to go to get the labour market back to its pre-COVID shape“.
New Vehicle Sales Jump 5.1%
Surprisingly, another eye-opening statistic of Australian business growth we’ve seen is that businesses and consumers are purchasing more vehicles in increasing numbers as the economy continues to improve. According to the Federal Chamber of Automotive Industries, whether it was for long-distance travel or a rehaul of a new business fleet, up to 83,977 new vehicles were sold in February 2021, according to the Federal Chamber of Automotive Industries (FCAI). Some unprecedented statics included the following:
- Total sales were up to 5.1% on the previous year
- Sales for more luxurious, larger vehicles from SUVs, light commercial vehicles and heavy commercial vehicles also increased
- Sales of passenger vehicles fell
According to FCAI chief executive Tony Weber, he claimed that the increase of sales volumes overall and the purchase of specific vehicles reflected increasing confidence within the market.
What does this mean?
According to FCAI chief executive Tony Weber, he claimed that the increase of sales volumes overall and the purchase of specific vehicles reflected increasing confidence within the market. He claimed the following:
During the past four months we have seen an increase of 10.6% in new vehicles and this has been reflected with strong growth in NSW, Queensland, Western Australia, South Australia, and the Northern Territory in February 2021,
We remain confident that this trend of growth will continue in an environment where business operating conditions continue to normalise.
With his statement, our experts at Rateseeker can only agree that we are equally confident that Australia’s economic growth and stabilisation will continue to fuel this trend as we move forward into 2022.
What’s the consensus?
While the Australian economy still has ways to stabilise to its original pre-COVID shape completely, we nevertheless are seeing significant progress since the lockdown in March 2020. From seeing more job vacancies and qualified individuals returning to the workforce, the federal government’s updated SME Loan Guarantee Scheme, to an increase in vehicle sales, such encouraging economic growth statistics can only prove that we are making the proper steps to return to the business hub Australia once was.
** General Advice Warning
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