The Australian Banking Association (ABA) is reporting that almost 85% of loans that were placed in deep freeze during the Covid pandemic have now resumed normal repayment. This is being seen as a positive sign that the economy is recovering.
By June 2020, banks had suspended about $264 billion in repayments on close to a million mortgages and business loans. Just 15% of these loans remain deferred as of the beginning of February 2021.
ABA CEO, Anna Bligh, has confirmed that the majority of mortgages and small business loans are back on track. Business loans are faring better with just 6.6% still frozen, while 18% of home loans also remain deferred.
In terms of regional performance, Victoria has the largest proportion of deferrals on home loans from June 2020 still frozen as of December 2020. It stands at 31% as compared to New South Wales deferrals that have fallen to 21% over the same period. This has been attributed to the less strict and shorter lockdowns experienced in NSW.
However, this positivity is likely to be challenged in the coming weeks with the looming end of JobKeeper. The end of this subsidy is to coincide with the cessation of loan deferrals. The Australian Prudential Regulation Authority has said that repayment deferrals must end on 31st March.
Banks have already begun calling on borrowers to resume payments, with some complaints to the National Debt Helpline indicating some lenders are asking for repayment of arrears in bulk amounts. Such demands when some borrowers are looking at possible job loss does not bode well for the economy.
JobKeeper has helped as many as 1.6 million Australians maintain their employment in companies and non-profits that have been hard hit by the pandemic. The payments have entirely or partly covered employee wages and are expected to end by 31st March as well. Treasury head, Stephen Kennedy, is hoping that the projected unemployment rate of 7.5% will not be reached despite expected job losses when the subsidy ends.
According to the Australian Taxation Office, JobKeeper has cost the federal government $83 billion as of February 2021. Repayments of this have been low, with firms having been in discussions with the tax authority over about $50 million, of which less than the $10 million has actually been repaid.
The Treasury and Tax office are expected to conduct an assessment on company tax returns to identify firms that have made profits and/or paid bonuses while also receiving JobKeeper support. Solomon Lew’s Premier Investments is one such company being scrutinised by Labour after reportedly receiving an estimated $45 million in government assistance