Happy new year! Or is it?
Happy new year and welcome to 2021! But if you thought 2020 was turbulent, brace yourself, things are about to get really interesting.
It’s well known that a million employers nationwide took up the government’s JobKeeper subsidy offering, with 60% of those in Victoria. And despite the ongoing COVID concerns, the feds have stated that as March 2021 ends, so does their stimulus, with JobKeeper ending and JobSeeker reduced. That’s assuming of course, that there’s no third wave (it feels terrifying even just to write it!).
So if you run a business, now is the time to take a step back and examine whether your business can survive in a post-stimulus world, and if so, what it’s going to look like. For example, will you need to cut your staff numbers in order to make ends meet? It’s likely many businesses will, which will lead to a predicted increase in unemployment.
There are also ominous signs coming out of Google, with the search engine reporting a spike in searches for “insolvency” and “bankruptcy” already, and we’re still three months away from the end-of-stimulus cliff.
Of course, anyone who lived through Victoria’s lengthy lockdown will know that things are only just starting to recover, as businesses emerge from the Christmas / new year break. But unfortunately, the state is at least three months behind the rest of the country, which could be telling as the stimulus comes to an end.
Eventually though, things will start to recover fully, as they must. And when this happens, like any debt situation, we will have to pay back what we have borrowed, which from both a state and federal government perspective, is a significant amount of money.
A simple reflection on the options available to governments in order to recoup expenditure reveals two likely devices: cuts in expenditure, and tax increases. I expect we’ll see both over time, with possible increases in state taxes like stamp duty, land tax and payroll tax, and even the possibility of a long-considered GST hike at the federal level.
In other news, Haywood Financial Management, The Finance Guru and Divorce Planning are all open for business for existing and new clients. We have completed our switch to our new licensee and will be finishing up training with them over the coming weeks. Please don’t hesitate to reach out if you or somebody you know could use our help.