Deloitte says 10 per cent of businesses could close due to impending September fiscal cliff

Economists are warning 10 per cent of Australian businesses could close if JobKeeper and loan deferrals are not extended past September.

Economists have warned hundreds of thousands of Australian businesses could face imminent closure if COVID-19 support measures are tapered too early.

A Deloitte Access Economics report has flagged nearly 10 per cent of the country’s businesses face the risk of failure if JobKeeper and loan repayment deferrals schemes end in September.

Deloitte noted an estimated 240,000 businesses predominantly in hospitality, professional services and transport industries were at high risk of closure.

JobKeeper payments are set to close on September 27. The wage subsidy scheme is designed to cover a proportion of an employer’s wage cost, providing workers with a $1500 fortnightly payment.

Victoria’s second lockdown is posing greater closure risks for Victorian businesses. Picture: Paul Jeffers/The Australian

Deloitte said around 40 per cent of businesses within the high-risk failure category only had enough cash to keep operations going for another three months.

“While it’s expected the business environment will improve over the next three months as restrictions are eased, it’s not known whether any improvement will be enough to enable businesses to recover, let alone survive, without JobKeeper support,” Deloitte said.

New South Wales, Victoria and Tasmania have the highest proportion of businesses accessing JobKeeper payments.

Deloitte said the second round of lockdown measures in Victoria would add an additional layer of stress to businesses within the states and reliance on the wage subsidy scheme.

Growing clusters of COVID-19 in Sydney could force the major city into a second lockdown. Picture: David Swift

It also noted the Northern Territory and the Australian Capital Territory were less exposed to the fiscal cliff as a result of quicker easing of restrictions and higher proportions of public sector workers.

“Canberra may well announce specific packages to support businesses beyond September,” Deloitte said.

“But in the meantime, it’s incumbent on suppliers, creditors and insurers to prepare contingency plans for a significant rise in hardship and bad debts.”

It also noted the looming fiscal cliff was likely to force more businesses into voluntary administration as an attempt to survive the economic downturn.

Deloitte’s analysis is based on Australian Bureau of Statistics and Federal Government data.