Summary

COVID-19 is a crisis situation for the Australian economy that is having a severe impact on the business sector. Access to capital is critical in this environment but varies significantly between different businesses. It is likely that limited access to capital will mean private companies and small and mid-sized enterprises will experience greater stress and for a more prolonged period of time.

Federal and state governments have responded to this crisis with much needed stimulus packages that are helping to keep companies afloat, but there is a limit to government stimulus as it cannot continue indefinitely. The tenure of the crisis is also exhausting the resources of businesses, with some likely to run out of ways to adjust. Unless longer term solutions can be found, it is likely that many private companies will not remain solvent.

We believe private debt providers, such as superannuation funds, can put capital to work in the economy, supporting private companies through the worst of the crisis and helping them to regain their profitability once the economy starts to open up again.

Hiran Wanigasekera, Executive Director, Debt Investments

We believe superannuation fund capital can provide a “bridge” for affected companies to keep them operational until the economy improves. By providing capital through private debt markets, superannuation funds can step in where the banking system cannot by assuming some of the risk. This will assist in the economic recovery, whilst also contributing to the superannuation funds’ aim of generating attractive long-term returns for their members.