It’s hard to convey how much daily life has changed for us all in recent weeks.
The scale and breadth of the impacts from the COVID-19 pandemic is like nothing most of us have ever seen before and is inflicting an unimaginable toll on the economy and society more broadly.
There’s no sugar-coating it – the stories from business customers are brutal.
But as Australia’s oldest bank, we understand that in these unprecedented times we all have a role to play to help the economy and the nation get through to the other side, which it inevitably will do.
Unlike past crises borne out of the financial sector, what we are facing is unique in that its cause is a public health crisis that has hit both supply and demand as large swathes of economies around the world shut down to slow the spread of COVID-19. Pubs, restaurants, gyms, retailers, travel…the list goes on. The end result is an extraordinarily rapid stalling of Australia’s “real economy”.
We are seeing the devastating impact on a daily basis.
In the past week, thousands of businesses have inquired about our new assistance packages – which includes loan repayment holidays for up to six months – across several industries. Demand for new business loans has also declined notably as customers focus on immediate stresses: do they need to close? What will they do with their staff? How much liquidity do they have and how long can they survive? How will they pay their rent and other bills?
The issues are complex and interrelated. The good news is this is not an economic crisis exacerbated by a liquidity or credit crunch and the banking system has never been better placed in terms of capital, funding and liquidity to provide support.
As one of the nation’s biggest lenders to businesses in the system, we are constantly assessing the situation and what more we can do to help as many customers as possible get through this incredibly challenging period.
Along with supporting the Australian Banking Association’s new COVID-19 Business Support Package unveiled today, we are extending our existing offer to defer principal and interest payments for six months for businesses with borrowings up to $10 million, up from the previously announced $3m threshold.
There are a few important points to this.
Firstly, it means 98 per cent of our business customers can now access this support.
But importantly, that means it now includes commercial property customers with borrowing up to $10m who commit to the bank that, for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears where those arrears are a result of COVID-19 many of which are the small businesses we all rely on. The expectation is this will help to reduce the negative feedback loop of stressed landlords forcing out stressed tenants who then have to make tough decisions about their staff. Clearly, the flow-on effects in downturns can be large, impacting families and society more broadly.
These important, immediate and practical measures bolster our existing support to assist businesses come out the other side.
Of course, there’s no silver bullet at times like these. And sadly, the reality is that not all businesses will survive as economic activity remains low in the six months or so of “hibernation” ahead.
But as the Prime Minister has made clear, the issues facing landlords and tenants are both complex and incredibly important to address. Everyone has a role to play here – landlords, tenants, government and banks.
Because as the virus is highlighting, all parts of the economy are connected. That includes micro, small, medium and big businesses.
And we are committed to standing by Australian businesses.