Tuesday, 2 June 2020
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Banks to freeze small business loans for six months

In an effort to avoid a recession in Australia, policymakers are moving at break-neck pace to form strategies to keep businesses and families afloat through the next six months or more.

With courts closed the legal profession is facing an impending fall, and the arts and entertainment sectors are feeling the crunch with billion-dollar blockbuster movies being shelved.

Most sports from local to international  are on hold  and supermarket employees are probably flagging under the weight of increased and panicked buying.

Hospitality was perhaps one of the first industries to feel the pain with many high end restaurants moving to takeaway models to try and pull in what they can as people avoid going out.

Many businesses are facing uncertainty and the government is introducing new measures day by day to stem the unemployment numbers and bolster the economy.

Measures for small business have largely focused on loans and loan structure with the latest being a freeze on loan payments for six months.

The federal treasurer, Josh Frydenberg, told News Corp, the move by the banks was an unprecedented game changer.

His comment comes a day after the Reserve Bank of Australia dropped interest rates to 0.25 percent, a figure not seen before.

Australian Banking Association boss Anna Bligh said the freeze on small business loan repayments applied to $100 billion of existing borrowings.

"There are many small businesses struggling with loan repayments, and this deferral will help them," Ms Bligh said.

NAB quickly followed the statement on Friday, announcing it would freeze all home loan repayment for customers for six months.

On Thursday after the RBA cut rates the Governor, Philip Lowe said at a press conference he was concerned about a rise in unemployment caused by businesses failing.

"The vulnerability for households comes if they lose their jobs, which is why we focus on doing what we can for businesses to keep employing people and keeping staff on," Dr Lowe said.

He also said if banks don't support their customers, the unemployment rate will be higher, creating a weaker economy which would lead to larger losses by the banks. 

Banks such as Commonwealth took the cut even further, dropping the loan rate by a full percent for small business.