Food for thought: social distancing will cripple restaurants

Social distancing rules spell disaster for restaurants. Picture: Getty Images

What to do with the JobKeeper allowance after September looks like being the most momentous economic decision for decades — it all depends what Australia’s chief medical officers decide to do about four square metres.

Right now, 3.3 million people and their employers are being supported by JobKeeper, at a cost of $10bn per month. If those people were unemployed instead of getting welfare via their employers, the unemployment rate would be above 30 per cent.

JobKeeper is legislated to end on September 27 — it is what Paul Keating might call L.A.W. law — but there’s a very large and very specific problem with the deadline: the four square metres rule.

On advice from the state and federal chief medical officers, national cabinet has decreed that each person in an enclosed space must have four square metres to themselves so they can’t spread SARS-Cov-2, the virus that causes COVID-19, to someone sitting close by.

It is very hard to see how medical officers can recommend this rule be lifted before there is a vaccine: it isn’t a matter of how many cases there are now, but rather preventing more in future, and the only way to do that without a vaccine is staying apart.

If the JobKeeper allowance ends on September 27, and the four square metre rule is still in place, hospitality businesses go into receivership en masse on September 28 and hundreds of thousands of people, possibly millions, will be thrown out of work.

An economic catastrophe would ensue — an industry that represents 7.2 per cent of GDP and more than 10 per cent of workforce would close. Tourism industries would stay closed.

There is a very wide range of rents for restaurants, but the average eatery in Melbourne, according to real estate agent Colliers, pays $7500 per square metre, and in Sydney, $12,825. For four square metres, that’s $30,000 rent per patron in Melbourne, on average, and $51,300 in Sydney.

I spoke to a couple of restaurant owners this week: margins have been screwed over the past few years and on average they’re getting about 5 per cent gross now, or were before the pandemic.

The back of my envelope suggests that each restaurant that keeps to four square metres per patron would need each diner to spend at least $2500 per sitting in Sydney and $1500 in Melbourne, assuming two sittings per day, to pay the rent and wages and leave a small profit margin.

Economic catastrophe

It’s not possible. The only reason any restaurant is operating now with the four square metre rule in place is either because they’re ignoring it, and hoping no one catches them (and I’ve seen a few those lately), or because they’re getting JobKeeper and/or they’re doing enough takeaway to keep the kitchen going.

Could all Australian restaurants survive by flouting the distance rule and doing takeaway after September 27? Unlikely. The roads would be choked with motorcyclists lugging insulated backpacks containing cold meals, all getting paid a fraction of what waiters get.

If the JobKeeper allowance does end on September 27, as legislated, with the four square metres still in place, then for another month the waiters, chefs and dishwashers thus unemployed would get the JobSeeker supplement of $550 per fortnight on top of the usual dole, so they would survive. That is due to end on October 27, at which point they would have to get a job or cut expenses to $40 per day.

If banks end mortgage repayment forbearance in September as planned, their houses would have to be sold. Nobody in the restaurant business, or tourism, would be able to service a mortgage — owners, chefs, waiters, nobody.

Every mortgaged house owned by someone involved in hospitality, entertainment and tourism would be listed for sale in October and their loans would have to be counted as non-performing by the banks, which would, as a result, become undercapitalised, and probably insolvent.

So there would be a property collapse and financial crisis to go with the spike in unemployment and double-dip depression.

With that in mind, the government is trying to figure out what to do after September 27, but the trouble is they don’t know — no one knows — whether the four square metre rule can be lifted then. Australia’s performance so far in dealing with the virus has been very good, with less than 7500 cases currently, 102 deaths, and 6870 people recovered from the disease. But it must be likely that the state and federal chief medical officers will advise their governments not to allow people to mingle until there’s a vaccine, especially after the increase in cases following the Black Lives Matter protests.

Prime Minister Scott Morrison and Treasurer Josh Frydenberg are desperate to stop the budget leaking $10bn per month, especially with tax revenue at deep recessionary levels as well, and in any case their party is deeply uncomfortable with welfare keeping businesses alive that should be closed in line with the “creative destruction” of proper capitalism.

In fact, my guess is that we will all be sitting cheek by jowl in restaurants, and at the footy, before the clock strikes midnight on September 26, and what’s more Australia won’t be the only country giving up on fighting the pandemic with social distancing before the third quarter is out.

If that’s what happens, and most countries decide to save their restaurants and mass entertainment industries rather than keep enforcing distance until there’s a vaccine, we are heading into a new world where a lot more people get sick and die than at any time since the 19th century, and healthcare is every country’s largest industry.

The only thing left for governments to do would be to distract the media from reporting the number of coronavirus deaths every day and upsetting everybody. Time for a cyber war?

Alan Kohler is the editor in chief of Eureka Report.