Scott Morrison’s word: $1m loans guaranteed

Scott Morrison will offer guaranteed loans of up to $1m to 3.5 million small businesses in a major ramp-up of stimulus.

Scott Morrison will overhaul of environmental laws following a review to be released on Monday. Picture: Andrew Taylor 

Scott Morrison will offer guaranteed loans of up to $1m to about 3.5 million small businesses in a major ramp-up of stimulus as the government prepares to reveal that the economic outlook has deteriorated on the back of the Victorian COVID-19 outbreak.

Ahead of an economic update on Thursday, during which the ­future of key support payments including JobKeeper will be outlined, the government will ­announce the new limit on loans made under its loan guarantee scheme to help drive the economy through the pandemic, lifting the cap to $1m from $250,000.

The new loan guarantee for small to medium businesses will extend to June next year after the second lockdown in Melbourne dampened expectations of a swift economic recovery.

The economic statement will reveal that the nation’s debt and deficit outlook has deteriorated over the past two months.

Josh Frydenberg will this week outline the future of income support measures after flagging that the $70bn Job­Keeper scheme would be ­extended beyond September as part of an extra round of economic support. The scheme is likely to be targeted at industries such as tourism and hospitality that have been hardest hit.

Finance Minister Mathias Cormann told Sky News on Sunday that there would be “adjustments” to the wage subsidy scheme, and post-September “it will be a matter of making sure that any ongoing support is ­appropriately targeted to businesses who genuinely need it”.

“The ultimate objective still has to be that we get back into a situation where all businesses are in a position to pay for the wages of their employees out of their ­income,” he said.

“We will need to get ourselves into a new normal situation with businesses right-sizing for the economic context that we are in.”

The Prime Minister will also embark on a fundamental overhaul of the commonwealth’s environmental laws following a review to be released on Monday citing flaws in the assessment of major projects. The Australian understands the government will seek to ­rewrite the Environmental Protection and Biodiversity Act to remove green tape holding up major developments and ­stifling economic recovery.

The review argues for an overhaul of federal and state assessments that would reduce the process to a single assessment that could fast-track approvals for developments by months and for some major projects by years.

The release of the 10-year ­review follows a briefing last Friday to the national cabinet subcommittee of federal and state treasurers by Productivity Commission chair Michael Brennan, who told them deregulation would be critical for economic ­recovery.

Mr Brennan outlined a series of major reforms for state governments to fast-track investment and approval processes, including the lack of national recognition of professional and trade licences, which was hampering job ­mobility across the country.

He also flagged the need for unrestricted trading hours, the lifting of curfews and streamlining of approvals across jurisdictions in a reference to the reform of the EPBC Act.

One critical reform would be the standardisation of land use and zoning.

The Treasurer said the new extended loan program for the small and medium enterprises program would help firms “access much-needed funding to help them adapt and grow through the recovery phase and beyond”.

“It will provide longer-term support to help them get back on their feet, restructure and invest for their future,” he said.

Commonwealth Bank chief executive Matt Comyn told The Australian the extended loan guarantee would provide small business with “access to a deeper and long-term pool of financial support which will be necessary to help underpin the recovery’’.

“It is clear from the challenges we are facing in Victoria that the recovery will not be as smooth or quick as first thought, which is why it is essential we come up with creative ­solutions,” he said.

“Today’s lifting of the amount available to $1m and the loan extension to five years will allow SMEs access to low-cost, guaranteed funding and to make the investments needed to get people back to work, create new jobs and lift confidence across the economy.”

The chief executive of the country’s biggest business lender, NAB’s Ross McEwan, also welcomed the changes, saying they would make the scheme “available to more businesses, for longer, to help them rebuild and support Australia’s recovery”.

Australian Banking Association chief executive Anna Bligh said the update would “open up the scheme to those businesses looking to invest or needing some extra support”.

The government in late March announced it would guarantee 50 per cent of up to $40bn in new unsecured loans to businesses, sole traders and not-for-profits with annual turnovers of less than $50m. Since the scheme was implemented on April 8, more than 15,600 businesses have accepted loans worth $1.5bn.

It will be replaced with an updated measure that, in addition to the higher loan limit, will allow secured lending, the removal of the requirement that banks offer a six-month repayment holiday and extend the maximum term of a loan from three years to five years.

The initial scheme had been pitched as a cashflow support mechanism to help businesses survive the initial COVID crunch, but demand for the products offered through the scheme has been crimped by the success of the JobKeeper program, while limitations placed on the loans — including the fact they cannot be secured against assets — have worked against take-up.

Council of Small Business Organisations Australia chief Peter Strong said the updated scheme would help corporate Australia bounce back from the COVID recession, and was “particularly welcome for businesses in the manufacturing area and for those who have a capacity to grow”.

“These businesses can get access to more money, they can get access to secure loans, they can get access for a longer period,” he said.

“What we need now is the banks to step up and support these businesses.”

About 230,000 workers have been stood down from their jobs but have maintained a connection with employers via the wage subsidy scheme, latest labour force statistics for June showed.

They face an uncertain future if firms cannot put them back to work.

Westpac chief economist Bill Evans has predicted that 1.2 million employees will remain on JobKeeper beyond September, while 600,000 will be receiving the wage subsidy out to June 2021.

ANU economics professor Bob Breunig said there was an argument to reduce the “generous” JobSeeker payment rates, as the boosted level could act as a disincentive for those without jobs to get back into work.

He said finding a job would be a tough task. “There simply aren’t the jobs. We can incentive them all we want with lower welfare payments, but where are they going to work? We might need higher benefits until there’s a return to some kind of normalcy.”

The Reserve Bank in its May economic outlook suggested the jobless rate might still be at 6.5 per cent in two years. Mr Evans predicts a 7 per cent rate by mid-2022.

Deloitte estimates 1.1 million Australians will be unemployed by the end of 2021, or 400,000 more than before the crisis struck.