Coronavirus - New Zealand
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@Baron-Silas-Greenback Wouldn't be many left would there.
In nice simple numbers a $1m revenue business @ 20% margin could have a profit large enough to look after a small family. Take that away for 2 years...what was very viable now isn't.
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@Snowy said in Coronavirus - New Zealand:
@Baron-Silas-Greenback Wouldn't be many left would there.
In nice simple numbers a $1m revenue business @ 20% margin could have a profit large enough to look after a small family. Take that away for 2 years...what was very viable now isn't.
I know you were going for simple numbers, but 20% margin is also generous (but certainly a minimal goal). Many business are waaay below that, but they are viable because they still make money for the owners, or they are growing/being repaired
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@Baron-Silas-Greenback said in Coronavirus - New Zealand:
@pakman said in Coronavirus - New Zealand:
@Godder said in Coronavirus - New Zealand
This is all relatively direct spending. What about indirect spending? Conservatively, we have already wiped 10% off GDP and increased unemployment to 10% (from 4%), and probably increased underutilisation to 15% (from 10%). GDP is simply a measure of spending in the economy, and if $31 billion didn't get earned or spent, that's a lot of money not available to buy a coffee with, to go out for dinner, to buy clothing, get a haircut (people still get haircuts, but fewer in a year). It's not going to be essential spending that gets cut, it's the discretionary spending.
If we just opted for social distancing and quarantining/isolation for border arrivals instead of lockdown, how many small businesses go to the wall in a year anyway because their income is down 20-30% and falling with no way to make it viable because their bank and landlord won't assist them? How many business owners increase their hours to 70-80 per week in an unsustainable and ultimately futile attempt to make it work? How many broken marriages, mental breakdowns, suicides do we get in that pathway? Is it more or less than the current pathway? Do we get worse or better outcomes from going tough now and soft later, or from going softer now but tougher for longer?
The premise of the current plan is that the total pain will be less if we get it done quickly than if we drag it out, especially because government can provide a lot more support in a short space of time than over a longer time frame.
We should see the next part of the government's financial support package this week - our current support is a good start, but hopefully this week provides a lot more support for small businesses especially as they need it.
Side note - a lot of owners of small businesses are in personal financial trouble because of personal guarantees. One of the reasons for companies as a legal entity was limited liability, but personal guarantees have made that a lot less of a reality. I would like to see personal guarantees banned to make limited liability companies actually limited liability, or if that isn't done, at least make them void if the failure was due to the pandemic (similar to the safe harbour announced for trading while insolvent if the insolvency is principally due to the pandemic). If someone added mortgages on residential property to fund business, I wouldn't be upset about that either...
Good post! As someone who, (pre CV) returned to NZ every nine months or so to visit elderly parents, I've gotten the feeling over the last two or three years that people collectively have been spending beyong their means.
Whether that's right or wrong, I don't think the business cycle will ever be abolished, so businesses which can't withstand a 20% fall in turnover for a year or two aren't really viable. IOW, CV in such cases won't cause their demise, so much as being the catalyst. Such businesses shouldn't be financed with lots of borrowing and can't afford high rents. Personal guarantees are only pouring fuel on that fire. But probably imprudent for the banks to lend without them?
I do think that post CV rent levels will come under threat -- if SMEs go broke the next tenant will need lower outgoings. And highly geared landlords will also be under the cosh.
Be that as it may, if CV severely curtails international tourism, business travel and immigration it's safe to say GDP will take a big hit.
Within that, a hard short lockdown seems more sensible, because debt/overdue payments are time related. But once the virus is all but gone (4 -8 weeks), I can't see the point of schools being closed, shops not being generally open subject to social distancing and people going back to work where WFH is less productive. Sport can be played, perhaps with some crowd restrictions.
But no V shaped recovery either way.
Are you joking? You think companies that cannot handle a 20% drop in revenue for a couple of years running aren't really viable?? If that is a prevailing thought we are screwed.
It's endlessly depressing that many continue to think of businesses in abstract terms rather than them being the futures of the owners, employees and their families. If the way forward is for everybody having to work for either the government (state or local), a large corporation, or gigging then please count me out.
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I thought this was an interesting post from #barbarian. The pandemic will have far reaching consequences regardless of how each individual government handles it. This is disruption pain and suffering on a global scale I can't ever recall seeing in my lifetime. This is world war level stuff
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@Crucial said in Coronavirus - New Zealand:
Hope I'm not Booboo-ing this (have purposely kept away from Politics like threads) but thought it made interesting reading
So the big plan is to push something that wasn't economically viable before a recession during an actual recession? Powered by positive thinking? Who is going to fund it? HE is absolutely loaded..... why doesnt he do it? And therefore why didnt he do it previous to the WuFlu if it is such a great idea?
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@Baron-Silas-Greenback said in Coronavirus - New Zealand:
@Crucial said in Coronavirus - New Zealand:
Hope I'm not Booboo-ing this (have purposely kept away from Politics like threads) but thought it made interesting reading
So the big plan is to push something that wasn't economically viable before a recession during an actual recession? Powered by positive thinking? Who is going to fund it? HE is absolutely loaded..... why doesnt he do it? And therefore why didnt he do it previous to the WuFlu if it is such a great idea?
So gross reading yet another gleeful article about how to push an agenda they support.
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@canefan said in Coronavirus - New Zealand:
I thought this was an interesting post from #barbarian. The pandemic will have far reaching consequences regardless of how each individual government handles it. This is disruption pain and suffering on a global scale I can't ever recall seeing in my lifetime. This is world war level stuff
To be sure, just because all have it bad, doesnt mean some cant be much worse though. So it isnt regardless of how each govt handled it at all, I refuse to give every govt n the world that cop out.
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This thread started out being about corona virus.
Now it seems to be much more politics than discussion about the virus. In fact apart from reporting of the daily numbers I can't recall anything about the virus as I've just caught up on all the posts over Easter. Just a bunch of people giving their opinions about how fucked up everything is but pretending that they are talking facts. Or criticising opinion pieces while quoting opinion pieces that support their own prejudices. Stating NZ was or wasn't on this or that trajectory before the lockdown is just an opinion. the one fact is that from a low base our graphs were tracking the same as every other countries so something had to be done. Whether our action was the right one it is impossible to predict yet. Time (and countless Royal Commissions) will tell.
Of course the economy is suffering but it is disingenuous to suggest that tourism wasn't completely fucked without a lockdown.
Some harsh realities. Plenty of people are quoting the fact that a high proportion of the people currently dying would have died in the next 18 months anyway. Cruel fact but true.
Similarly a high proportion of the businesses that are going to fail would have failed in the next 18 months. Cruel fact but equally true. Particularly as @mariner4life said we were well overdue a significant correction anyway.I don't know how bad it is going to get for the economy. I don't even want to guess but bad really bad. We're forecasting a $12 mill shortfall this year (25%). Frankly I'd take that in a heartbeat. We've asked everyone to take a 10% pay cut in the hope that we can save jobs and are only too aware of the hardship this will pose for many who live hand to mouth.
It was heartening to see that there will be a lot of detail released this wee; stimulus package, economic forecasts, criteria for Levels 3 and 2, criteria for the same. Once we have all that I think we will all be in a better position to read the frozen chicken entrails and pontificate. In the meantime it seems to me reading this that the lockdown has us all needing to chill.
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@dogmeat no aspect of the economy will be left unaffected. I had tradies telling me weeks before lockdown that their work was ready to hit a wall because a lot of materials made in China weren't being manufactured or shipped as they grappled with the virus. Try buying items off Amazon right now and you'll find major restrictions on item availability, and forget about trying to buy anything health or medical related. Whether countries are in lockdown or not, no one is traveling globally so tourism was going to be poke either way. Any business that has global links of any kind with suffer disruption
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I have 10 years experience in fast food which as an industry is a lot of franchisee and independent SMEs and a few businesses with 100+ employees (head offices of the big names, Restaurant Brands, Burger King). Most of that was as a store manager in franchisees, so budgets and impact on staff of difficult decisions was something I was very familiar with.
One point from that experience is that a decrease in revenue wouldn't usually eliminate a business in that industry because a lot of costs would reduce in line with the revenue reductions, so the margin would reduce but still be there. In fast food, that will mostly be food costs and labour costs through reducing rosters.
However, if revenue drops enough, the margin becomes 0 or negative because the fixed costs (rent and opex, power, insurance, some bank fees, interest on debt, refurbishment costs, to name a few) and debt repayments become unmanageable. Business loans are usually higher interest and shorter terms than mortgages, so can easily overwhelm a business.
Something like that would play out across most small businesses. If they are owned outright and have 3 months of working capital, they will probably be in a good place to make it out the other side, possibly on a smaller scale. If they have 2 weeks working capital and a large business loan, it will be much harder.
In businesses with 0 employees like a hairdresser or contractor, 20% reduction might be fine if the profit is still a liveable wage, or disastrous if they have equipment loans or fixed costs that see profit reduce well below a liveable figure.
It's a big range out there, and people will need a range of help.
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@dogmeat I don't see how any of the topics you listed were off topic? The economic/political aspects are definitely worth discussing.
Especially police overreach, how we get out of this hole we are in, as well as how the lockdown is going and the health impact.
It's all completely linked. I guess we could start splitting into specific threads if people are finding that this is jumping around too much?
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@dogmeat said in Coronavirus - New Zealand:
This thread started out being about corona virus.
Now it seems to be much more politics than discussion about the virus. In fact apart from reporting of the daily numbers I can't recall anything about the virus as I've just caught up on all the posts over Easter. Just a bunch of people giving their opinions about how fucked up everything is but pretending that they are talking facts. Or criticising opinion pieces while quoting opinion pieces that support their own prejudices. Stating NZ was or wasn't on this or that trajectory before the lockdown is just an opinion. the one fact is that from a low base our graphs were tracking the same as every other countries so something had to be done. Whether our action was the right one it is impossible to predict yet. Time (and countless Royal Commissions) will tell.
Of course the economy is suffering but it is disingenuous to suggest that tourism wasn't completely fucked without a lockdown.
Some harsh realities. Plenty of people are quoting the fact that a high proportion of the people currently dying would have died in the next 18 months anyway. Cruel fact but true.
Similarly a high proportion of the businesses that are going to fail would have failed in the next 18 months. Cruel fact but equally true. Particularly as @mariner4life said we were well overdue a significant correction anyway.I don't know how bad it is going to get for the economy. I don't even want to guess but bad really bad. We're forecasting a $12 mill shortfall this year (25%). Frankly I'd take that in a heartbeat. We've asked everyone to take a 10% pay cut in the hope that we can save jobs and are only too aware of the hardship this will pose for many who live hand to mouth.
It was heartening to see that there will be a lot of detail released this wee; stimulus package, economic forecasts, criteria for Levels 3 and 2, criteria for the same. Once we have all that I think we will all be in a better position to read the frozen chicken entrails and pontificate. In the meantime it seems to me reading this that the lock down has us all needing to chill.
This thread still is about the wuflu, but the virus has impacted every aspect of peoples lives, and the decisions around the disease are now political.
It is understandable that as the decision to panic will get more and more analysis, those who are ardent supporters of the govt and the decision would like to see discussion shut down. -
@Kirwan said in Coronavirus - New Zealand:
@dogmeat I don't see how any of the topics you listed were off topic? The economic/political aspects are definitely worth discussing.
Especially police overreach, how we get out of this hole we are in, as well as how the lockdown is going and the health impact.
It's all completely linked. I guess we could start splitting into specific threads if people are finding that this is jumping around too much?
They arent jumping around, they are related.
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@Godder said in Coronavirus - New Zealand:
I have 10 years experience in fast food which as an industry is a lot of franchisee and independent SMEs and a few businesses with 100+ employees (head offices of the big names, Restaurant Brands, Burger King). Most of that was as a store manager in franchisees, so budgets and impact on staff of difficult decisions was something I was very familiar with.
One point from that experience is that a decrease in revenue wouldn't usually eliminate a business in that industry because a lot of costs would reduce in line with the revenue reductions, so the margin would reduce but still be there. In fast food, that will mostly be food costs and labour costs through reducing rosters.
However, if revenue drops enough, the margin becomes 0 or negative because the fixed costs (rent and opex, power, insurance, some bank fees, interest on debt, refurbishment costs, to name a few) and debt repayments become unmanageable. Business loans are usually higher interest and shorter terms than mortgages, so can easily overwhelm a business.
Something like that would play out across most small businesses. If they are owned outright and have 3 months of working capital, they will probably be in a good place to make it out the other side, possibly on a smaller scale. If they have 2 weeks working capital and a large business loan, it will be much harder.
In businesses with 0 employees like a hairdresser or contractor, 20% reduction might be fine if the profit is still a liveable wage, or disastrous if they have equipment loans or fixed costs that see profit reduce well below a liveable figure.
It's a big range out there, and people will need a range of help.
Burger King has just gone into receivership..
https://www.stuff.co.nz/business/industries/121000806/burger-king-franchise-owner-in-receivership
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@Baron-Silas-Greenback was asking for opinons basically.
I'm inclined to agree with you, but can see the benefit in have an economic one. Can't see how you can extract the politics when the PM is deciding when we can take a shit.
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@Kirwan said in Coronavirus - New Zealand:
@Baron-Silas-Greenback was asking for opinons basically.
I'm inclined to agree with you, but can see the benefit in have an economic one. Can't see how you can extract the politics when the PM is deciding when we can take a shit.
Probably better to create a medical one then?
I think part of it is that the narrative and acceptance levels are changing and some people dont like that. If you cannot refute an argument .. shut it down. The very FIRST post in this thread is one talking about govt action....