Australia’s financial advisers swamped by clients’ calls for help
Australia’s 23,000 financial advisers have been almost overwhelmed by pleas for help as clients prepare for the impending withdrawal of government support for small business and banks’ loans at the end of September.
Many are offering pro bono advice as new clients join the rush to get their personal finances in order before what some economics predict will see our economy”fall off a cliff.”
The government and the Big Four banks are believed to be locked in discussions as they try to avoid a position where hundreds of companies could and thousands of jobs are cut in October.
Yesterday, the Australian Bureau of Statistics announced job vacancies have suffered their biggest collapse in history, with new figures revealing huge falls in the number of people working in key industries over the past three months.
Vacancies alone fell by 43 per cent in the three months to May.
Angus Woods, managing director of Adviser Ratings (www.adviserratings.com.au), which is backing a campaign for more accessible financial advice, said thousands of his members were working round-the-clock to keep up with the demand as families ask for help in reworking their finances.
Experts are predicting October will bring the worst of the economic impacts of the COVID crisis : bank holidays on home loans are set to end and the largest lenders like the Commonwealth Bank are already calling customers to try and estimate default levels.
That would impact the property market and small businesses, so compounding the enormous problems of trying to get some normality back to economy.
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Here’s what’s likely to end in September:
The $1500-a-fortnight per staff member payment made to eligible businesses (and sole traders) has been crucial in keeping the Australian economy running, albeit at a reduced rate. It’s been fraught with criticism – for excluding too many workers, for being too confusing and for the massive accounting error that saw it over budgeted by $60bn. However, JobKeeper is currently keeping more than 3 million workers employed, and has made it possible for many businesses to stay open that otherwise wouldn’t have been able to.
But JobKeeper is currently set to end on September 27, bringing with it, according to some pundits, a deluge of economic disaster. Businesses that are still running at partial capacity due to distancing restrictions will have to front up the cost of wages – meaning workers are likely to be laid off or whole businesses will go under.
The ripple effects of that will stretch into every corner of the economy.
Formerly known as Newstart, is the unemployment benefit for those who are seeking work. At the initial onslaught of the crisis, the JobSeeker allowance, which was previously at about $560 a fortnight for a single person, was effectively doubled to $1,100 a fortnight with the addition of the $550 fortnightly Coronavirus Supplement from April 24. The supplement is also being paid to those on the Partner Allowance, Widow Allowance, Sickness Allowance, Wife Pension, Youth Allowance, Austudy, ABSTUDY, Parenting Payment, Farm Household Allowance or Special Benefit.
However, the Coronavirus Supplement is also set to be terminated on September 24, dropping payments to the 1.6 million people currently receiving JobSeeker down to $560 a fortnight – just $40 a day.
A variety of business and community groups, as well as the Greens, have spent years campaigning for an increase to the $40-a-day JobSeeker Allowance, but the coalition has thus far resisted increasing the payment and continues to insist that it will return to its original rate on September 24.
With the announcement that the official unemployment rate is at 7.1% and the real unemployment rate is closer to 11.3%, the Federal Government is rumoured to be set to increase JobSeeker, though it’s not clear whether the base rate will rise or another temporary supplement will be added.
Prime Minister Scott Morrison has said he will review all the economic information before making a final call on JobSeeker and JobKeeper at the end of July, after the government’s mini budget.
“I am not going to be rushed on it, I’m going to be careful about it, I am going to take the advice and I am going to grill the data,” he said. “Supports will be important, we put our supports in place, income support, JobKeeper and JobSeeker, for six months so we would have that time to properly move for the next step, to change gears again. Those arrangements, it is hard to say how long they would need to extend for because of the nature of the COVID crisis we find ourselves in.”
Amid the dramatic reduction to JobSeeker and the ending of JobKeeper, September is also the month in which the national moratorium on evictions expires. Thousands of renters, many with months of rent in arrears owing, will have their incomes reduced or eliminated and will suddenly be able to be evicted if they can’t pay rent, which may cause a spike in homelessness.
Many of the major banks have also offered mortgage holders a pause on their payments, which sounds great in theory but in reality means that interest has continued to accrue and will eventually cost borrowers more over the life of their loan. Most banks gave a maximum of six months for the payment holiday, meaning mortgage holders must start making payments in full again in September.
On the business side of things, the final payment of the government’s $32bn cash flow boosts – essentially a waiver of PAYG payments for the March to June and the July to September quarters, a minimum of $10k each quarter – will be paid in September. After that, PAYG obligations resume – all in the same month that the government will cease subsiding wages.
With all these stimulus measures coming to an end in September, it’s set to be a perfect storm of economic disaster. We are now looking to the government to see how they’ll handle the next challenge in the COVID crisis. Stay tuned for their mini budget in July.