Sydney lockdown to impact demand for finance

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With half the nation in lockdown, there are a lot of businesses that are looking for surety before they invest in the future, according to CreditorWatch CEO Patrick Coghlan. He told MPA that past lockdowns have been shown to impact the level of demand for finance from businesses who aren’t keen to take on more debt when the future remains uncertain. According to CreditorWatch data, credit enquiries were starting to head back to normal levels over the past few months as confidence increased.

“Hopefully it (the current lockdown) is a two-week blip and those numbers aren’t affected and people can have that confidence that we’re getting back on with it,” said Coghlan. “Ultimately though, plenty of businesses won’t be investing in the future because the future is still so uncertain. Once we get that sort of clarity, I think we’ll see a significant increase in applications for finance.”

“Clarity” in the Australian context doesn’t just point towards vaccination, but it also refers to how the country will operate once widespread vaccination has been achieved – something that hasn’t been communicated by the government just yet. As other developed nations across the world prepare to open up their economies after successful vaccination roll outs, Australian businesses are feeling the frustration of having no idea when they will be able to trade without fear of border closure or stay at home orders being enforced.

“I think the uncertainty is the hardest part for them because they can’t plan with any sort of surety for the future,” said Coghlan. “There’s no clear road out – there’s not even an obscure road out from the government.

“Every business owner and every business manager has KPIs and I think that’s sort of what they’re crying out for – what do we have to aim for or what do we have to look forward to before we can get back to normal?”

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When asked what the impact would be on businesses if the lockdown was extended beyond two weeks, Coghlan hinted that it would be significant.

“Every day that it’s extended it has a tremendous impact on plenty of businesses that either have to shut down, operate at a reduced capacity or can’t operate as well because people are working from home or there’s no-one around,” he said. “It’s certainly detrimental to the economy.

“NSW is the biggest economy, we’re the one that has done a lot of the heavy lifting over the last 18 months, particularly with Victoria being locked down for so long. We’re taking in something like 50% of all international returned people so the economy is extremely reliant on NSW and Sydney is obviously the biggest part of that.

“It will be interesting to see if GDP is affected. Every day that it’s extended further is certainly a negative.”

On the other side of the coin, the lockdown, as it stands now, isn’t likely to send a huge number of businesses “to the wall,” he said.

“We know that administrations are still down 30-40% on pre-COVID numbers and court actions as well,” he said. “I ran some numbers just recently to look at the proportion of Victorian businesses that make up administrations. Despite their 100-plus day lockdown, we haven’t seen a bigger increase in Victorian administrations.”

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He added that there was still plenty of “synthetic stimulus” flowing through the market from the federal government’s COVID support measures, and that the small business support offered by the NSW government was “better than nothing.”

“It all helps,” he said. “They’re not huge amounts being offered out. I’m sure they don’t make up for lost revenue and profit for plenty of businesses.”

Kate McIntyreKate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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