Fire, Floods and now world-wide rampant COVID-19 infection – the forecast of lending and interest rates is now very much in focus.
From 2011, the cash rate in Australia has been cut 16 times, falling from 4.75% in October 2011 and now resting at 0.50% as of today, 18 March with an inter-meeting RBA cut looking likely in response to the ongoing COVID-19 worldwide disruption. We are current anticipating a short-term credit squeeze & expect that processing/settlement time frames are going to be materially affected over the next 8-10 weeks whilst Australia moves through the peak exposure of COVID-19.
I might be wrong – time will tell – but my hazy crystal ball predicts that this will have dissipated by 30 June and allowing a month for business to recover and put plans into action we should be back to ‘normal’ by end of July but anticipate a busy June as clients finalise restructures and last minute tax-influenced purchases. As always, we encourage early planning and start talking to your tax adviser no later than 1 June where possible and contact us.
Don’t forget about the temporary increase to $150,000 per asset for an instant write off between now and 30 June 2020 (coupled with the lowest interest rates in memory) & take advantage of the tax break for the coming year – nearly everyone will be affected by the current environment so a reduction in tax will likely be welcomed. We will also be able to set a deferred contract start date & defer the initial payments to allow required purchases now without having to start payments until after the end of financial year.
New analysis has found that Australian banks should be able to absorb the increase in credit losses and disruption to funding markets due to the COVID-19 outbreak – as long as the duration and severity of the pandemic’s impact are in line with expectations. According to S&P Global Ratings, a longer lasting and more severe impact than its revised base case could trigger significant problems for the Australian banking system.
If the virus progresses on the predicted timeline, the group estimates that it will contribute to the Australian banks’ credit losses nearly doubling in 2020 from historic lows in 2019 which, while significant, is low compared to what is expected in other countries. Additionally, Australian banks should be able to absorb these increased credit losses in spite of headwinds from low and declining interest rates, a likely further decrease in demand for credit, and continuing customer remediation costs.
If you are impacted by the virus by reduced income, business interruption – talk to us now, be proactive & dont wait until its too late. We will be contacting all clients to reach out for information on the options available to them, such as:
- • The deferral of scheduled loan repayments, including interest only
- • The rearranging of existing loans, such as switching from P&I to interest only with the waiver of establishment fees
- • Deferring up to 6 months payments (It is essential that these options and implications are discussed with us before talking directly to your bank)
- • The waiving of early withdrawal fees for customers wishing to withdraw from term deposits and/or Farm Management Deposits
- • Working capital assistance
- • No interest rate increases
For up to $1,000,000 we can arrange quick, easy new funding and variations to existing to help you and your business weather this current market.