Economic Impact of a Recession
By Renee Ballinger
With Australia now officially in a recession and Government payments starting to reduce and phase out, it is imperative that business owners take a step back at look at their business. Now is the time to assess and review strategies, budgets and staffing, cashflow and return the focus to growth and recovery as soon as possible.
A recession is defined as two consecutive quarters of negative growth and a couple of weeks ago Australia officially entered a recession for the first time in almost 30 years.
We are lucky that Queensland, and particularly Central Queensland, have perhaps been less impacted than other parts of the country and some businesses seem to have already recovered from the initial impact of COVID-19, however, as Government stimulus measures cease over the next 6 months, the economic fallout and the effect on local businesses remains unknown.
Economist Nick Behrens estimates that in Queensland we are facing a 2.5% reduction in economic activity in 2020, which translates to an estimated unemployment rate of 9% in December, or around 140,000 jobs lost across the state. Although the JobKeeper program has been extended, the stringent eligibility criteria (basically, a 30% reduction in turnover when comparing the September 2019 quarter versus the September 2020
quarter) means that many local businesses will not be eligible for the continuing JobKeeper payments.
In addition to this, the end of loan repayment deferrals will be approaching, which again, has an impact on cash available in the business. Even if trading activity has been steady or may be returning to normal, the economic downturn and lower consumer confidence that is expected could have an effect on revenue, profitability and your overall financial position.
For these reasons, monitoring business results and implementing strategies for managing cashflow will be critical over the coming months.
If you need assistance or advice with managing your business cashflow please contact the professional team at UHY Haines Norton CQ on 07 4972 1300.