Pittwater Life December 2020 Issue

Business Life: Money
with Brian Hrnjak
Business Life
Did we have the recession
we were supposed to have?
BEACHES BUBBLE: Our small businesses experienced a recession, at least technically, but only for a short time.
This month we ask the
question: are we in a
recession… or is it something
else? Of course, when
I use the word ‘we’ I’m only
referring to those who may
actually have a chance of reading
this so it’s we as in Pittwater
not we as in I am, you
are, we are Australian. I can’t
really take the pulse of the
rest of the country – hell, we
can’t even travel to Queensland,
South Australia or West
Australia because the Premiers
of these States believe that we
live in a COVID hotspot.
Getting back to the question,
the economists aren’t
entirely sure. In late October
the Australian Financial
Review carried a headline
that declared: ‘The recession
is over: RBA’. Economics correspondent
Mathew Cranston
wrote: “Reserve Bank deputy
governor Guy Debelle has
declared Australia is technically
out of recession, telling a
Senate estimates hearing that
the September quarter would
show the economy growing
and the drag on the economy
from Victoria would be less
than first thought.”
Later in the article the
confusion became apparent:
“Dr Debelle said the
difficulties in forecasting were
now the worst he had ever
confronted. ‘The range of uncertainty
around the numbers
at the moment is as large as it
has been in my career,’ he told
the hearing. ‘We are having a
lot of trouble trying to understand
where we are let alone
where we are going.’”
In an opinion piece in the
AFR in Mid-November, Vimal
Gor, head of bond, income
and defensive strategies at
Pendal Group (the old BT
Funds Management) wrote:
“This has been a recession
like no other. Financially, most
recessions have many losers
and very few winners. This
time around the picture is far
more mixed. Some have been
hit very hard. But many have
emerged massively better off.
Tragically, small businesses,
particularly in hospitality,
where people get off their
arses and create their own living,
have felt the full impact.
Public servants and most
employees in big business,
cashing their guaranteed pay
cheques, have actually got
richer. Most super funds are
back to levels of a year ago
and real estate prices are actually
higher in many places.
Hardly a standard recession.”
There’s a strong echo here
of the views then expressed
by three of four of the major
bank CEOs:
ANZ – Michael Bleby in the
AFR reported on 16 November:
“ANZ has scrapped its
forecast for a pandemic-linked
10 per cent drop in house
prices and says a jump in
sentiment based on stimulus
measures and record-low
interest rates will curb the
decline, and could even result
in ‘modest’ price growth this
year. It expects strong growth
next year – housing prices in
Perth are likely to jump 12
per cent, Brisbane 9.5 per
cent and Hobart 9.4 per cent.
Sydney prices are expected
to rise 8.8 per cent – close to
the national average – but
Melbourne prices will lag, with
7.8 per cent growth.”
CBA – AFR Chanticleer
column 18 November:
“Firstly, consumer and busi-
74 DECEMBER 2020
The Local Voice Since 1991
ness confidence is surging due
to the country’s extraordinary
success in suppressing the
virus. Second, Australians
have been justifiably cautious
and very sensible in managing
their personal finances.
The third reason for Comyn’s
confidence speaks directly to
Australia’s collective psyche:
‘I don’t think the housing
market is a risk anymore.’
Like most of the banks, CBA
had built substantial house
price falls into its economic
scenarios at the start of the
crisis. But the combination of
low interest rates, stimulus
measures and the nation’s
handling of the health crisis
now means Comyn sees house
price growth of 5 per cent
in calendar 2021, albeit with
variations from state to state.”
NAB – AFR Chanticleer
column 18 November: “The
recovery that he and his
peers at the top of the big
four banks had previously
feared could take years is
already well underway due to
the extraordinary success Australia
has had in suppressing
the virus. In fact, [NAB chief
executive, Ross] McEwan believes
Australia’s economy can
return to pre-COVID-19 levels
by the end of 2021 – a full
year ahead of what NAB had
initially predicted. The recovery
he is seeing among retail
and business customers has
him thinking that the federal
government may not need to
provide a lot of support beyond
March. Any stimulus that
was required would be tightly
targeted to industries and
areas that really needed it.”
And each of these CEOs
are in a fantastic position to
comment as between them
they have real time access to
the spending, savings and
borrowing data for most of
the country.
I wanted to pick a line
through these emerging
optimistic outlooks as this
certainly appears to be the
case around here, with the
Northern Beaches Bubble
protecting many of us from
the worst economic effects of
the pandemic. As a community
we have benefited from
the flight from the CBD and
The Local Voice Since 1991
the desire to avoid public
transport, our low-density living
compared to other parts
of Sydney, our accessible waterways
and beaches being a
playground and holiday area,
and of course our relative
wealth and socio-economic
advantage to begin with. Face
it: we were bloody lucky and
we continue to be so with no
second wave to deal with.
So back to the question of
are we in a recession? The answer
is that many businesses
around here probably experienced
a recession, at least
technically, and then only for a
short time, but it was no GFC
or 1991 magnitude event. It
is hard for businesses to fail
when interest rates are around
3% unless your income has
completely stopped – and then
it doesn’t really matter what
interest rates are.
Rapidly deployed government
stimulus in the form of
cash flow boost, JobKeeper
and tax cuts allowed so many
businesses to sail through
the period of uncertainty and
turbulence.
But it was a recent phone
call from a pilot, a captain of
20 years’ standing, in tears
because he had no idea of
what the future held, that was
a stark reminder to me that
some among us are not yet
through to the other side. He
and others like him in parts
of the travel, tourism and
entertainment sectors are experiencing
the worst of what
a prolonged recession can be
psychologically and economically
and they will require
our support for an extended
period of time.
Brian Hrnjak B Bus CPA (FPS) is
a Director of GHR Accounting
Group Pty Ltd, Certified
Practising Accountants. Offices
at: Suite 12, Ground Floor,
20 Bungan Street Mona Vale
NSW 2103 and Shop 8, 9 – 15
Central Ave Manly NSW 2095,
Telephone: 02 9979-4300,
Webs: www.ghr.com.au and
www.altre.com.au Email:
brian@ghr.com.au
These comments are of a
general nature only and are
not intended as a substitute
for professional advice.
DECEMBER 2020 75
Business Life