The Morrison government will announce on Monday a tripling in the size of cheap loans and grants for any small businesses hit by the bushfires, in a move that will put pressure on the thinning budget surplus.
The decision could blow emergency funding out beyond the extra $2 billion announced for the disaster a fortnight ago and follows Prime Minister Scott Morrison’s meetings with small business leaders last week.
The government will announce loans of up to $500,000 to any business that has suffered asset or revenue losses from the fires, in an attempt to regain political ground after taking a hit in the polls over its response to the fire crisis.
The loans, an increase from the $130,000 in some states, will be for up to 10 years with interest rates of just 0.6 per cent and repayment holidays of up to two years. They will be complemented by a tripling in the size of available cash grants – from $15,000 to as much as $50,000.
“We’re listening and acting on the advice of small business leaders to get more cash into coffers,” Mr Morrison will say on Monday. “Getting small businesses back on their feet is critical.
“We want to ensure the right support is in place for small businesses as they get past the initial recovery phase of this unprecedented bushfire crisis,” he says.
The summer bushfire catastrophe has already claimed at least 28 lives and destroyed more than 2000 homes.
The Insurance Council reports that 13,750 bushfire-related claims have been made, worth more than $1.34 billion, and economists expect that anywhere between 0.2 per cent and 0.4 per cent could be wiped off economic growth.
It is estimated that there are about 192,000 small businesses and sole traders that have taken a hit in the most severely affected bushfire regions.
Strong budget position
A new Deloitte analysis shows the federal budget might be $15 billion better off than previously thought over the next two years once iron ore prices are factored in – spot prices have surged to $US95 a tonne, at least $40 higher than those assumed by the budget.
Treasurer Josh Frydenberg said the government’s fiscal discipline meant that expanded funding for such a crisis could go ahead without reneging on a return to a budget surplus – the first in 12 years.
He said that since the mid-year budget update, “we have further announced the establishment of the $2 billion National Bushfire Recovery Fund that will provide additional funding beyond that which will flow under existing disaster recovery arrangements”.
“This has only been possible through strong economic management and a disciplined and responsible approach to managing the budget,” he said.
A stronger than forecast iron ore price will also make it easier for the government to roll out more generous funding for bushfire disaster relief measures.
Deloitte Access Economics partner Chris Richardson said the government’s fiscal strategy allowed it to “use fiscal firepower in a way few other nations can”.
“The bushfires spending is a good example of how a strong budget position helps in a time of crisis,” Mr Richardson said.
We had only asked for it to be increased to $20,000 and they lifted it to $50,000, so we can’t complain.
— Peter Strong, Council of Small Business Organisations of Australia
He believed the conservative estimates on iron ore prices could help the government deliver budgets over the next few years that were better off by more than $15 billion.
The government’s more than tripling of the size of available cash grants to small businesses hit by the fires has come as a surprise to the chief executive of the Council of Small Business Organisations of Australia, Peter Strong.
“We had only asked for it to be increased to $20,000 and they lifted it to $50,000, so we can’t complain,” Mr Strong said.
Higher grants of $75,000 are also on offer for farmers.
“I would have liked to have seen an overall cost to the budget from this but I think the government is actually still trying to work out how many businesses will take up the grants,” Mr Strong said.
“People are saying it doesn’t matter how much the government should spend on keeping these businesses and communities alive but governments still need to be prudent.”
Mr Strong expects that many of his members will be cautious in taking up the ultra-cheap loans because some sectors will be so heavily hit that a business‘s long-term viability might have changed.
The new measures follow a $76 million tourism package announced on Sunday, which focuses on local and global marketing efforts. The Victorian government is expected to announce a package this week.
Drought Minister David Littleproud and Victorian Emergency Services Minister Lisa Neville also announced a $75 million clean-up package on Sunday.
So far, the federal government has sent out cash payments totalling more than $50 million to families and businesses.
Small Business Minister Michaelia Cash said the government would go to any lengths to support small businesses hit by the fires.
“The Morrison government stands shoulder to shoulder with our small business owners and operators. We will provide them with the support they need to get back on their feet because we know this is a fundamental element to rebuilding vibrant and resilient communities,” she said.
The Australian Taxation Office has also changed its policy for affected businesses.
Taxpayers in postcodes suffering from the fires will have until May 28, 2020 to lodge business activity statements and file income tax returns.
Similarly affected businesses that carry out their pay-as-you-go instalments quarterly have also been allowed to vary their instalments to zero for the December 2019 quarter.
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