Latest lockdown in Melbourne to push some SMEs over the edge

The latest round of lockdowns in Melbourne is set to slam industry across the city.

Melbourne furniture maker Peter McManus in his Preston workshop. Picture: David Geraghty

Staff at Yard Furniture, in Melbourne’s northern suburbs, were cleaning up the workshop and showroom on Tuesday afternoon in what owner-operator Peter McManus described as “preparing for what feels like a Christmas break”.

The packing up of equipment and machinery at Yard’s Preston workshop was being repeated right across Melbourne’s vast network of suburban manufacturers as businesses prepared for six weeks of lockdown.

Economists have warned some businesses may never come back.

Mr McManus, who founded Yard nine years ago, said he has never faced a situation like the six-week shutdown that starts on Wednesday night. 

“The shutdown means we’re just treading water. I’m not in as bad a physical position as some companies and I’ll give good credit to government support programs and stimulus packages for that,” he said. 

“You could average it out at $65,000, that’s what the lockdown might cost us in turnover.” 

The boutique furniture company, which employs six people across its workshop and showroom, has seen business hold up, at least in part, under earlier lockdowns thanks to housebound Australians with money to burn. 

“Because people are at home and nesting, our web traffic has gone up quite a bit. Orders have been steady after the initial shock of the pandemic,” Mr McManus said. 

“The general narrative among many customers was we had to cancel holidays, so we’ve got a bit more spending money.” Mr McManus, who started Yard Furniture in his backyard, moved the business to a bigger factory in Preston seven years ago but said current conditions did not support further expansion. 

“Getting to this point, it’s been a challenge.

“I’ve worked a lot of hours, which is a part of working for yourself in a small business,” he said. 

The Reserve Bank on Tuesday warned the coronavirus outbreak in Victoria was having “a major effect on the Victorian economy”.

The central bank expects unemployment to hit 10 per cent later this year as a “baseline scenario” due to further job losses in Victoria.

Investment bank UBS said it was likely Victoria’s small business sector would need more help, noting many small to mid-sized businesses had already been pushed to the brink before Victoria’s stage 4 lockdown.

Banking regulator APRA released fresh figures on Tuesday revealing 17 per cent of all small business loans across Australia had been effectively “frozen” by banks. This represents $55bn of loans.

Mr Mott said there were already indications small to mid-sized business performance worsened over June after Melbourne re-entered lockdown, pointing to Australian Bureau of Statistics data showing small to mid-sized business revenue has fallen 33 per cent since the pandemic began.

Mr Mott said that surveys of small to mid-sized business sentiment showed that almost a quarter of all firms receiving COVID support expected to close when assistance measures expired, while a third said they would lay off staff.

Mr Mott said that further support would be needed to stave off higher unemployment and business closures.

“With 56 per cent of Australians employed by SMEs, further support appears necessary to avoid a second wave of business failures and unemployment,” Mr Mott said. 

As the Victorian economy was about to be go into hibernation, Commonwealth Bank revised down its outlook for Australia’s economic growth and employment to a 4.2 per cent contraction. 

CBA’s head of Australian economics Gareth Aird said national employment would now decline by as much as 120,000 over the third quarter of 2020, with Victoria to see the greatest jobs losses. 

“The broad message from our forecast profile is that the economic recovery has stalled at the national level due to the situation in Victoria,” Mr Aird said.