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What has happened?
To ‘batten down the hatches’ is a nautical term from the early 19th century. When a ship was about to enter rough seas, the captain would order the crew to batten down the hatches to prevent the ship from sinking. Our government is trying to flatten the COVID-19 curve to prevent the same devastating and overwhelming chaos in our medical system that is currently occurring in Italy and increasingly around the world. Quite simply, they’re also concurrently trying to prevent a financial system collapse. It seems that no matter where you look the rapid spread of COVID-19 is having a major impact on the economy.
Yesterday, the federal government announced the largest stimulus package in the nation’s history. They have indicated that it’s likely there will be more to come. This alone should tell us that we are in uncharted waters and the economic effects of this virus are going to be felt for some time to come.
Mark Korda, one of Australia’s leading financial insolvency experts, wrote an excellent article in The Australian Financial Review on Friday last week. He discusses steps that need to be taken by our government and business community to “prevent catastrophic damage to Australia’s businesses”. Yesterday’s stimulus package announcement and proposed temporary changes to insolvency laws appear to support some of his suggestions.
This is real and it feels quite sudden, but I fear that too many Australians are unaware of the potential severity of this event. Regardless of the security of your employment, this must be taken seriously.
Lenders have been proactive and are taking the extraordinary step of offering to defer affected customers (business or home loan) mortgage repayments for up to six months. Some have also announced huge reductions in interest rates for home loan and business customers. These are great initiatives, however, I implore you to proceed carefully when thinking about deferring your loan repayments. Do not rush into this. If you feel there are no other options be sure to ask your Lender and/or Adviser the following questions so you fully understand the implications of hardship provisions:
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