7th July, 2020

Victorian SMEs brace for second bout of stage 3 lockdown

With an ongoing rise in COVID-19 cases in Victoria, Premier Dan Andrews has announced a six-week lockdown at Stage 3 for Metro Melbourne.

Small business owners in metropolitan Melbourne and the Mitchell Shire have been dealt a blow with the Victorian Government imposed stage 3 lockdowns for a period of six weeks, from midnight Wednesday. Regional Victoria has not been included in the lockdowns.

This means that Melburnians will be prevented from leaving their homes for any purpose other than work, study, food, exercise or medical care. Schools in affected areas will not re-open in term 3, throwing families back into a period of remote learning.

Melburnians are also unable to travel to other parts of the state during the lockdown restrictions, with police patrols issuing fines.

This news will prove to be a devastating blow to small business owners that had begun making tentative steps toward economic recovery.

Premier Daniel Andrews told a media conference this afternoon that the difficult decision was based on health advice, and was a necessary step. He blamed a sense of complacency that has crept into daily lives in Victoria.

“We’ve got no choice but to take these difficult steps. We are in more precarious, challenging and potentially tragic position now than we were in some months ago,” he told reporters.

“We can’t pretend it’s over. It’s not over in so many parts of the world, and it’s not over in metropolitan Melbourne.”

Premier Andrews did indicate that some support is being considered for small businesses in Victoria as the pandemic rolls on into the new financial year.

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Covid-19 cases have been on the rise

Victoria recorded 191 new cases of coronavirus on Monday, taking the state’s total to 772 known active cases – an increase of 451 cases in the week to Tuesday. There are 2,024 people in Victoria who have recovered from the deadly virus.

More than 300,000 residents in 10 affected postcodes have been in lockdown a few days, along with 3,000 residents in a dramatic, hard lockdown of housing estates in Melbourne’s inner suburbs on the weekend.

Residents returning home were confronted with police at the front of their estate explaining that they were to stay indoors for at least five days to halt the spread of the virus. However, there have been indications from government that the lockdown could be extended.

The COVID-19 pandemic has caused financial ruin for so many in small business, who were forced to literally lock their front door and left to re-negotiate rental terms with landlords on their own.

However, the Victorian Chamber of Commerce and Industry supports the strict restrictions for 10 postcodes given the recent spike in infections in an attempt to bring the virus under control, saying there’s no other choice.

And while some sectors of the small business community adapted to the restricted trading conditions and profited handsomely, these stories are unfortunately in the minority.

READ: Tips for pivoting your business into lockdown

COVID-19: Taking an economic toll

The impact on the broader Australian economy is predicted to be significant. In 2018-2019, Victoria contributed 23.7 percent of Australia’s national GDP, with most of this productivity occurring in the wholesale (18.7 percent), retail (13.7 percent), construction (13.5 percent) and manufacturing (12.8 percent) sectors.

Victoria’s unemployment rate has increased to 7.1 percent, with the latest figures revealing that 227,700 people lost their jobs in May.

Australian Bureau of Statistics data reveals that about 200,000 small businesses stopped trading in response to the crisis by the time JobKeeper was announced.

Two-thirds of businesses were still reporting reduced revenue in June. Of those, about a third were reporting revenue losses of 50 percent of more.

Economic woes to deepen with restrictions

IBISWorld Senior Industry Analyst Nathan Cloutman says overall, Australia GDP is expected to decline by on percent in 2020-2021, before recovering by 4.3 percent in 2021-2022.

“The second lockdown of Victoria is an indication of just how quickly COVID-19 can return, after public discussion turned to talk of a complete elimination of the coronavirus as little as one month ago,” said Cloutman.

The latest outbreak is also expected to postpone plans to reactivate international travel, while tourism, restaurant, and cafes are expected to continue to struggle through 2020-21, according to IBISWorld.

“The second outbreak in Melbourne is a vindication of those who have called for restraint in relaxing social distancing measures. While Victoria has been the first Australian region to experience a second wave of Covid-19, it’s unlikely to be the last,” Cloutman said.

Digitisation a way forward

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell says digitisation is emerging as a key driver of success in small businesses.

A recent survey by NBN Co revealed that half (49 percent) of the 1,000 Australians surveyed had increased their online shopping during the pandemic shutdown period, and 70 percent are consciously supporting local businesses online.

“COVID-19 has delivered a harsh lesson that small businesses can’t rely on outdated business models and bricks and mortar stores anymore,” Carnell said.

The ASBFEO office has produced a COVID-19 Recovery Plan recommending a suite of reforms to help small businesses survive in these significantly challenging trading conditions.

The recommendations cover a range of areas including taxation, access to justice, industrial relations, government procurement and cutting red tape. It can be downloaded here.

Looking for guidance on how to keep your business afloat in these trying times? From tips on JobKeeper to staying resilient, check out our COVID-19 resource centre and get on top of your lockdown life today.