Business failure rates down

Defying some predictions (similar to the unemployment rate), business failures are down through June and July. How much of that is due to the financial support packages is unknown.

We’re still in the middle of a wild global economic storm, and things will get worse. But no one expected us to actually eradicate covid, and our points of comparison are scant. The economy is doing vastly better than anyone anticipated.

Business are bracing, and have made significant layoffs and reduced hours, but the feared wave of company collapses hasn’t yet made even the hint of an appearance. Sectors unexposed to border closures are, however, basically back to normal.

I am not sure those complaining about the health:economy trade off give quite enough credit for how a successful response for the former bolsters the latter.

These stats are telling:
-Wage subsidy payment to business that have since failed: $11m
-Wage subsidy repayments by business who found the downturn actually wasn’t bad enough for them to qualify: $317m

The first stat will undoubtedly grow dramatically once the extension (effectively a subset of the most vulnerable) expires, but that is a crazy low baseline that suggests the contagion is far less acute than feared.

The wage subsidy extension expires this month, so the crunch will likely come from September onwards. It’s impossible to predict how bad (or not bad) it might be for both job losses and business failures.

See Unemployment statistics for June quarter 2020

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4 Comments

  1. David

     /  8th August 2020

    How utterly terrible are the people doing the forecasting, its almost a dick measuring game on who can predict the worst possible scenario.
    Lets face it computer models are utter garbage and only seem to work by accident, life has too many variables for any model to work especially when its comes to behaviour and the climate.
    At the moment I can safely say that residential building work will dry up by February in Canterbury because the site prep work has literally stopped. Having said that in the last few weeks after lockdown perhaps buyers have finalized their plans and are ready to submit to council and we will all tick along swimmingly, who knows.
    I think the usual slowdown during election season wont happen given the surety of the outcome.

    Reply
    • Duker

       /  8th August 2020

      Yet those with ‘real time data’ find the economic outlook OK
      Small business payments data from accounting firm Xero showed revenue plunged 39 per cent in March, but had almost completely recovered to 2019 levels by June. Our extremes – both in shutdown and in bounceback – far outstrip similar figures from Australia and the United Kingdom.
      ‘Sunshine on a cloudy day: Why forecasters got Covid unemployment wrong’
      https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12354496

      Quite frankly, people are having a bit of trouble accepting that the economy is in a much better position than we thought,” Stephens says.
      “In Australia, unemployment has already reached 7.4 per cent.” [to be fair it was trending up before the Covid crisis]

      “Even Zollner, the bear of ANZ,[Sharon Zollner chief economist predicted UE at 10% this quarter] points to Australia where Melbourne faces the fresh hell of a second hard lockdown, and says New Zealand is “the new lucky country”.
      Like all people seriously wrong she says they have just ‘moved’ the 10% UE to the next quarter… the stopped clock theory of economics

      I wont even go into that Clown Stephen Joyces column today in the herald…wasnt he a replacement for Hooton ? whos back with a column..never can have enough former national officials and ministers giving advice can we….

      Reply
  2. duperez

     /  8th August 2020

    The comment about how terrible the forecasting is and predicting the worst case scenario will be a hard one to beat today.

    Can you think of any in this forum who have dropped truckloads of predictions and played a (now) long running game of ‘worst case scenario’? And often married the two? 🤔

    Reply
  3. Alan Wilkinson

     /  8th August 2020

    Just had a UK guest cancel her December booking because of doubts travel will be possible here by then. I can’t see domestic tourism taking up more than a percentage of that slack and the airlines will remain crippled except for freight.

    We won’t see the real impact until the wage subsidies end and the ex pilots transition to moving road cones around.

    Reply

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