Business braces for Victorian Covid-19 shutdown cost

A harsh six-week forced hibernation will see hundreds of thousands of workers sent home and sinkholes emerging in company balance sheets.

Melbourne CBD during stage four lockdown. Picture: Tony Gough

Corporate Australia is counting the cost of an unprecedented shut down of a once-thriving economy that drives a quarter of the country’s growth, with the $320bn retail sector facing a harsh six-week forced hibernation, hundreds of thousands of workers sent home and massive sinkholes emerging in company balance sheets.

Victorian Premier Daniel Andrews released his blueprint to knock out the coronavirus pandemic on Monday after days of spikes in the new cases of COVID-19, instantly creating a dividing line across the Victorian corporate landscape that has created winners — businesses than can remain open — and losers — those that must close or severely shrink capacity.

The only reprieve was that the thriving online economy, dominated by retailers such as Kogan, Catch Group, Temple & Webster and other chains with enhanced digital capabilities will be able to trade as normal, handing even more market power to the online players.

“We are glad we can still serve our customers through our online channel,” Bunnings chief executive Michael Schneider told The Australian. “Our online offer is a fantastic one and proves the importance of why we made the decision to go online and that has proven to be a great call.”

He said Bunnings would continue to support 170,000 trade customers in Victoria, keeping the machinery and infrastructure of the state economy going through the next six weeks.

Business leaders with large Victorian businesses were engaged in with meetings with management and staff to prepare for the forced shutdown, with corporates such as Wesfarmers holding talks with its non-food businesses, namely Bunnings, Officeworks, Target and Kmart, while other chief executives were preparing to roll down the shutters on their Melbourne businesses.

Billionaire retailer and Harvey Norman chairman Gerry Harvey struck a more positive note, telling The Australian he was hopeful that once the six-week forced shutdown had passed that sales and economic activity would bounce back.

“Well, all our Melbourne shops will be closed but our other Victorian shops will be open, we will just close and there is not much we can do, we will look after our people,’’ Mr Harvey said.

A person crosses the empty Evan Walker Bridge in Melbourne. Picture: Daniel Pockett

He said Harvey Norman’s experience overseas in economies that closed then reopened, such as central Europe, Ireland and southeast Asia, was that consumers and businesses sprang back to life.

“What has happened in all the other countries where we had been closed — we are in seven other countries and were closed in every one of them — was when we opened back up again sales surged and we picked up quite a lot of what we had lost.

“So it is not catastrophic, it is six weeks out and we will just deal with it.’’

The nation’s biggest department store Myer will close its historic Melbourne CBD store as part of the forced shutdowns. Myer said it would be closing stores in metropolitan Melbourne from Wednesday night, although it would remain open to consumers who use online and click & collect shopping.

Wesfarmers chief executive Robb Scott, whose Perth-based conglomerate has a large portion of its businesses based in Victoria, said he respected how difficult the decisions made by the Victorian government had been, with the company leveraging its digital assets to keep serving customers.

“Our businesses are well equipped to further adapt their operations to continue to support customers through the lockdown, with a focus on supporting small business, trades and home delivery and contactless click & collect in many of our metro stores.”

 

He welcomed added government support for the economy, struggling businesses and individuals, and noted that there could be finetuning of the new regulations as issues emerge in the national supply chain in which Melbourne plays a major role.

“Given the severe impact the additional measures will have on households and businesses we welcome the government’s advice that it will consider some finetuning in coming days where it becomes aware of significant inconsistencies and anomalies.

“For example, these restrictions could prevent households getting essential goods quickly while activities such as liquor sales and horse racing continue.

“We also welcome the government’s recognition of the complexity and interconnected nature of supply chains in producing and distributing essential products both within and beyond Victoria. We urge the government to consider further changes that can be made before the end of this six-week period to reduce the harm to people and the economy where it is clear this can be done without adverse impact on controlling the virus spread.”

Mr Scott said Wesfarmers was assessing the likely impact of the measures would provide an update to the market shortly.

Wesfarmers CEO Rob Scott. Picture: Colin Murty

Billionaire retailer Solomon Lew was more frustrated by the shutdown, savaging Mr Andrews for not acting more decisively and sooner in combating the coronavirus pandemic, saying the government could have prevented unnecessary illness and deaths in the community.

Mr Lew, who owns a fashion empire under his Premier Investments company that owns a stable of fashion retailers, said there would be significant consequences to the harsh restrictions.

“The situation in Victoria has escalated and public health needs to be protected above all else. While this is the right step, acting sooner could have prevented a lot of illness and unnecessary deaths,” Mr Lew said.

Premier Investments owns chains such as Portmans, Dotti, Just Jeans, Peter Alexander and Smiggle, while his family also owns a large portfolio of fashion businesses.

“In my view the Andrews government should have moved faster to tighten restrictions. Delaying has only placed further pressure on the rest of the country and the national economy,” Mr Lew said.

“We expect significant consequences from the inaction, in particular, vast amounts of cost in Federal government stimulus that is going to be required to support the Victorian community through this challenging period.”

Solomon Lew. Picture Stefan Postles

PwC chief executive Tom Seymour said the stage 4 lockdown would not only have a direct impact on Victorian GDP, but a “confidence impact that creeps up the coast”.

“There is a confidence issue around it,’’ he said. “What it really shows is anyone who thought this was going to be a V-shaped economic impact has given up on that. This will be a long, slow climb out of it.”

But he expected the nation would recover faster than other parts of the global economy, in part because of the “good job” done in managing the pandemic.

“The big challenge now for government and business is sponsoring innovation. I think you will see more of that in the next three years than we have seen in 30 years,’’ he said.

“But the next six months are going to be tough.”

 

Peter Wilson, CEO of plumbing giant Reece, said the lockdown was “deeply concerning.”

“Just the impact it is going to have on people’s lives. Getting through the whole mental challenge of this is enormous,’’ Mr Wilson said

Reece so far had only one frontline employee diagnosed with coronavirus, contracted it from his sister in health care.

Mr Wilson implored the Victorian government to allow Reece to keep operating, claiming plumbers and the plumbing industry played a key role in preventing disease. The company will now be allowed to continue operating under the stage 4 restrictions.

He noted there were lessons from the New Zealand lockdown, when Reece’s operations in that country were shut down.

“The experience we had in New Zealand ... they went too strong and then they had to soften it. The supply chain just can’t be switched on and off that easily,’’ he said.