COVID-19 Economics: Financial gurus bracing for a 'tsunami' of bankruptcies in 2021

Forecasts show a wave of businesses could be facing bankruptcy once the government's support packages run dry in 12 months time.

COVID-19 Economics: Financial gurus bracing for a 'tsunami' of bankruptcies in 2021

Australia could face a "tsunami" of bankruptcies when government support packages and existing capital run dry as a result of COVID-19, a lead financial institution has warned.

Malcolm Howell, bankruptcy trustee and partner at insolvency firm Jirsch Sutherland, forecasts that the majority of these bankruptcies will come in 12 to 18 months time thanks to a delay in the economic impact of coronavirus.

The most at risk, says Howell, are small-business owners who have been forced to use personal finances to prop up their businesses during mandatory shutdowns.

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"Once the government relief measures expire, many SMEs that have deferred their liabilities are likely to receive a severe capital hit six or more months down the track and might not be able to meet their obligations," Mr Howell said.

"And given a lot of small-business owners often use personal finances for business borrowings – including using their homes as a guarantee – they are more vulnerable."

Mr Howell said signs of an easing house market will put a further dent in the pocket of struggling businesses who hope to use personal assets to offset business debts.

"Any business that has used personal finances for business borrowings is at risk," he said.

"As property prices fall, there is reduced levels of equity with which to finance or prop up a business."

The spike of these insolvencies has been forecast to come in the middle of 2021, after businesses have used the "breathing space" offered to them by the government.

People are seen in long queues outside the Centrelink office in Southport on the Gold Coast, Monday, March 23, 2020.

Financial experts are urging businesses who forecast wearing the hit of COVID-19 in a year's time to seek financial advice before it's too late.

"Seek advice early and talk to your accountant or insolvency specialist," advises Mr Howell. "The relaxed insolvency laws mean you have six months to decide what the best solution is.

"Temporary changes to the insolvency rules will buy people time to seek advice and work on the best solutions available, but we are bracing for a wave of personal insolvencies next year."

Importantly, Mr Howell pointed out that many business owners feel shame or fear in declaring bankruptcy even if it is the result of something out of their control like coronavirus.

"Bankruptcy is a result of circumstances and sometimes it's the only way to recover and to maintain your mental health and wellbeing and that of your family," says Mr Howell.

"Financial pressures affect everybody in the family, not just the individual concerned."

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Source : 9 News More   

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Melbourne meat plant COVID-19 outbreak grows

Victoria has recorded 17 new cases of coronavirus, including another four infections linked to the outbreak at the Melbourne meat facility.

Melbourne meat plant COVID-19 outbreak grows

Victoria has recorded 17 new cases of coronavirus, including another four infections linked to the outbreak at the Melbourne meat facility.

The number of cases at Cedar Meats in Brooklyn has surged to 49, with mostly abattoir workers infected.

The Department of Health confirmed the first case of the cluster was diagnosed on April 2, but since the person had not been at the plant for four weeks, the workplace was not considered an exposure site.

The second case linked to the facility was diagnosed on April 24, followed by a third person a day later who attended Sunshine Hospital to receive emergency treatment, prior to diagnosis of COVID-19 or developing symptoms.

Chief Health Officer Professor Brett Sutton told 3AW he was confident the original source of the cluster had not stemmed from a worker who tested positive for the virus in early April.  

"I have been told that, that early case wasn't part of the cluster - wasn't on site," he said.

Prof. Sutton said the early cases linked to the cluster were known, but it remained unclear how the outbreak emerged.

"People can have really mild symptoms and we'll really struggle to understand who introduced it and when, but somebody's brought it into the facility."

Authorities began contact tracing once the second person tested positive to the virus.

9News understands Cedar Meats only found out there were COVID-19 infections prior to April 27 during a phone call with the Department of Health last night.

https://twitter.com/IzaStaskowski/status/1257796156051972097https://twitter.com/TheTodayShow/status/1257795117878071297A total of 34 coronavirus cases have now been linked to the Cedar Meats plant in Brooklyn.

General manager Tony Kairouz said in a statement all 350 staff had been tested for the virus.

"From the time we became aware that one of our staff had contracted the virus we had kept our staff closely informed," he said.

"By Thursday 30 April we mandated to all staff that they had to get tested for COVID-19. We worked closely with DHHS and by the end of the day Friday 1 May, all staff had been sent for testing."

Victoria has a total of 1440 cases of COVID-19. Among the new cases, seven were from overseas travellers in mandatory hotel quarantine and six remain under investigation.

There are 145 cases that may have been acquired through community transmission. Currently eight people are in hospital, including six patients in intensive care.

A total of 162,000 tests have been conducted in the state.

Cash boost for casual public sector workers

Victorian Treasurer Tim Pallas has announced 3000 of the state's casual workers in the public sector would be entitled to a cash boost of $1500 per fortnight before tax, if they lost their jobs due to the coronavirus pandemic.

The support package would last until September and would see workers redeployed to other areas in the public sector experiencing a surge in demand, such as healthcare.

Mr Pallas said the scheme was necessary due to casual public sector workers such as swimming pool lifeguards, staff at the Melbourne Aquatic Centre, ticket staff at the Melbourne Museum or the Melbourne Convention and Exhibition Centre, being ineligible for the JobKeeper program.

"We are protecting thousands of jobs for casual public sector workers who have been stood down due to coronavirus," he said.

"These workers are not eligible for the Commonwealth's JobKeeper payments so we're stepping in and making sure they get the support they need to make it through to the other side of the crisis."

The fortnightly payment scheme will be funded through the support of all three tiers of government, federal, state and local councils, meaning ratepayers will foot a percentage of the cash boost.

Source : 9 News More   

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