Margaret Thatcher famously said that the problem with socialism was that sooner or later you run out of other people’s money. As much of the Western world descends into a medically-induced quasi-socialism (what else would you call a regime where the state rules which businesses may trade, and how, with an iron fist?), economies have so far held up better than might have been expected.
So far.
Because, so far, most governments have staved off the worst effects of their heavy-handed responses to the Wuhan plague by splurging taxpayers’ cash in a Keynesianism-on-steroids splash. In Australia, the Morrison government doubled welfare payments and topped up the pay of “non-essential” workers forced into repeated lockdowns.
The latter is about to come to an end – so, will the economic COVID vultures come home to roost?
Businesses are bracing for an insolvency cliff when JobKeeper ends in three months after changes in bankruptcy laws also kicked in at the start of the year, while border restrictions and outbreaks of COVID-19 continue to affect many employers.
The tale of the reality of lockdowns can be seen in Australian cities everywhere, as shuttered shops proliferate and once-bustling commercial hubs become ghost towns. But governments persisted with the delusion that they could simply “freeze” economies.
The federal government temporarily changed bankruptcy legislation at the peak of the coronavirus pandemic to help employers hibernate through lockdowns. But the insolvency safe harbour rules have now ended and creditors are able to apply for a bankruptcy notice against a business when outstanding debts reach $10,000, half of what it was during the peak of the crisis. The debtor has 21 days to respond to a notice down from six months.
While these changes started from January 1, CreditorWatch chief executive Patrick Coghlan says the end of support measures in March like wage subsidy scheme JobKeeper and mortgage deferrals will be the trigger point for many companies.
“We are definitely going to see an increase in insolvencies,” Mr Coghlan said, “I don’t think they’ll happen in January … I think there could be a March cliff.”
But the reality is that businesses still have to pay bills, even if government regulations are keeping customers locked out or socially-distanced to a trickle. Tourism is especially vulnerable.
Mr Coghlan listed the end of JobKeeper, mortgage deferrals and rental protections as among the reasons businesses will find it difficult to make ends meet. Tourism industry groups have asked for an extension to support measures to avoid mass closures amid border restrictions across the country.
He said the worst of the bankruptcies had likely been avoided by getting outbreaks under control and record-level government spending to keep companies afloat but there needed to be a reduction in the protections.
“I think it’s quite good they haven’t extended [bankruptcy safe harbour] again. We need to get back to somewhat normal trading conditions because we’ve been in such a synthetic environment for so long, and rightfully so,” he said.
The left of politics are naturally sniffing around the smell of taxpayer’s money.
The federal government has consistently said the plan for the wage subsidy scheme was for it to be “temporary” and has not committed to any extensions beyond March, but Labor has criticised any reduction in support when the latest outbreaks and border restrictions are not yet resolved[…]
Opposition Leader Anthony Albanese was critical of any near-term cut to JobKeeper, which on Monday was reduced from $1200-a-fortnight to $1000 for full-time workers and from $750 to $650 for part-time workers.
The Age
While Albanese has a point that cutting off support while governments are still hanging the millstones of repeated lockdowns around businesses’ necks will almost certainly precipitate the so-far-postponed catastrophe, the suspicion is that this is merely a wedge to drive home further left-wing policies. Watch how quickly “short-term support” becomes a call for a permanent policy, such as the left’s utopian hobby-horse de jure, “Universal Basic Income”.
Please share this article so that others can discover The BFD