If you have an empty swimming pool and put a tap in it, connect that tap to a water source and turn that tap on, you will fill the swimming pool with water. It will be awash with water. That is pure science.
If you have a country and the government of that country pour billions of dollars into the economy (by borrowing, selling bonds, or directly printing money), that country will be awash with cash. That is simple economics.
The Australian Government have poured billions of dollars into the economy by giving it to its citizens, institutions, and businesses, directly or indirectly. There is so much money now poured into the Australian economy that one could think that we did not have a crisis, and we were on the road to Shangri-la. My apologies to business owners who are closed because of the pandemic. I am only trying to make a point.
The strategy of paying JobKeeper and boosting JobSeeker has meant that fundamentally everyone (barring those who fall through the cracks such as overseas students and visitors who are stuck here) have had access to money. Take-away delivery turnover has tripled in turnover, online gambling and liquor consumption has risen dramatically, reflecting consumer consumption during the pandemic has continued.
Direct payments to Australians will move to indirect economic stimulation. The JobKeeper and other stimulus payments end, and JobSeeker payments are rewound to where they were.
At this point, by March 2021 the policy will be “let’s see what bottom looks like” and then react. At this time as they say in the classics, the party will be over. The moratorium on eviction will be over, financial institutions will no longer have mortgages and loans on hold or reductions, and people and businesses will then face a new reality.
It is not that the governments are packing up their financial bat and ball and going home.
Governments will move to aggressive indirect supporting of the economy and at this point business owners need to be more focused on grabbing opportunities, being cagier about income, costs and tax planning and have a flexible structure. Be on the lookout for contracts, opportunities and market shifts that can be followed to gain the best advantage.
There have been plenty of messages from up high about keeping the economy fuelled and up and running.
The Reserve Bank is giving federal and state governments the green light to spend more and run deficits to get the economy out of the coronavirus recession, saying it will be the only way to cut unemployment.
The Reserve Bank governor Phillip Lowe said as governments could borrow at low-interest record rates, there was no reason for them to hold back from loosening the purse strings, adding they should be more worried about unemployment than credit downgrades.
The business council of Australia this week urged the federal government to support critical industries directly, saying it would not “cut the mustard” for the government to stand by through the post-recession recovery.
Further, the sates have been pushed to carry some of the load. The Prime Minister has said that the federal government cannot do all the heavy lifting but also cautioned state governments not to borrow and spend for the sake of it. The treasurer suggested the states focus on such areas as social housing, infrastructure, small business grants and regional development. (And they could all start with working out how food will get harvested this year).
Federal Government debt, this week reached an all-time high of $749.6 billion, with another $7.5 billion to be sold next week. We are well on the way to a trillion dollars of debt in Australia. A lot more money will be borrowed by the federal and state governments and poured into the economy.
And so, where do you fit into all of this.
Your Business Angels need to not only make sure that we have our clients receiving all that is available in direct support but also prepare our business clients for what is ahead, a strange mixture of difficulties and opportunities.
Difficulties because many of our clients face the calamity created by COVID-19 and need to reignite their online casinos aud business in new markets they may not be experienced with while needing to translate the opportunities of the indirect government stimulus packages into a real business, even if they are down the line in contracts or backwash of money.
There is a lot to keep doing. There is a lot to find out and a lot to change.
