City, tourism businesses may lead insolvency wave

MORE than 350 Victorian businesses went bust between the start of April and the end of September, with experts warning of more economic carnage in 2021.

Temporary debt relief measures will be wound beckon January 1, and the Job Keeper supplement ends in March, sparking fears many struggling businesses may not survive beyond then.

Figures show the owners of 355 Victorian businesses faced personal insolvency between April and September.

Data from the Australian Financial Security Authority revealed that despite the economic crisis, the number of business-related debtors in Victoria was down 42 per cent compared with the 612 insolvencies in the corresponding six-month period in 2019.

The drop-off was attributed to COVID-19 stimulus measures, such as Job Keeper and safe-harbour provisions allowing companies to trade while insolvent. Creditor Watch chief economist Harley Dale said when those policies ended, many businesses would no longer be viable.

He said it was likely to be drawn-out process rather than tsunami effect. “It’s inevitable we’ll see an increase in insolvencies in 2021and into 2022,” he said. “The unfortunate reality it’s going to be a very challenging time for a number of small to medium enterprises. “But he said there were some signs of the economy bouncing back better than predicted, which could help save businesses pushed to the brink.

Council of Small Business .He said there was a divide between some regional and suburban businesses that fared this year compared with many city businesses that were in “dire straits”.

During Melbourne’s extended lockdown, Hawthorn café Barton Milk Bar had huge demand for takeaway coffees from people working from home’s-owner James Laski said there had been a few sleepless nights at the start of the pandemic but they had got through thanks to government support and the rush of regular customers.

“It was a combination of Job Keeper and then also the local community supporting the business,” he said. “To have that level of support, we’ll never forget that.”

Mr. Laskie’s sister and crowner Cat Laski said they hoped that momentum would continue. “Everyone’s been happy tube out and about. Hopefully that carries on into next year, “MS Laski said. Australian Small Business and Family Enterprise Ombudsman Kate Carnell said at least 2000 Australian businesses would have gone broke if not for government measures.

But there was bleak news to come once that “life support “was removed. “We’re going to see a whole lot of businesses go to the wall, which is really sad,” MS Carnell said. “People may hang in until March when Job Keeper finishes but then we’ll catch up —plus a bit. “It would be a “long haul” for many businesses.

“They’ve used up whatever nest egg they might have had and there is still a really challenging time ahead,” she said. Businesses involved in tourism and events would be among the hardest hit. “Travel agents are in a world of trouble; anyone who relies on overseas visitors or overseas students is still in a world of trouble,” Ms Carnell said.