Government policies related to economic recovery from the coronavirus pandemic will need to be adapted to support Australia’s charities, according to a new report.
The report launched by Social Ventures Australia and the Centre for Social Impact on Wednesday noted that Australia’s 54,000 charities employ 1.3 million people, and contribute more than 8% of Australia’s GDP — the equivalent of the entire construction industry, and more than the manufacturing industry.
The report argued that charities would be particularly vulnerable to the economic impacts of the coronavirus pandemic due to three factors: they were already in a “precarious” financial position before the pandemic; their revenues don’t recover from downturns in the same way that business revenues do; and they can’t easily access the resources needed to “rebuild and transition to a new normal”.
“For each of these reasons, charities will need tailored support to survive and thrive in the coming years,” the report said.
Social Ventures Australia and the Centre for Social Impact noted that their past research has shown a 20% drop in income would lead to one in six charities exhausting their liquid reserves within six months.
“If they are forced to close, or to shed jobs at a scale to match the income drop, we could see more than 200,000 jobs lost,” they said.
“Based on data available so far, we believe that it is reasonable to assume that on average charities could see a 20% drop in their revenue for the duration of the crisis. This will vary from charity to charity, but gives an estimate of the scale of the challenge that charities are facing.”
A range of factors has left charities vulnerable, the report said, including that they rely on governments for a large proportion of their revenue, and because they may continue to deliver services to those in need even when they are not funded to do so.
If governments attempt to reduce debt and rebalance budgets quickly in response to COVID-19, charities would likely be affected due to an increase in demand and a decline in revenue, the report noted.
“Unlike commercial businesses, demand for critical services run by charities – not just emergency services but lots of different early intervention services and points of community connection – goes up when our community faces challenges,” it said.
Charities expect to face a “looming October cliff” due to the end of the JobKeeper program and the JobSeeker coronavirus supplement. Up until this week, those measures were set to wrap up at the end of September. They have now been extended, but at lowered rates.
The report argued that many of the current government supports would not help charities survive.
“For example, charities already have access to a number of tax exemptions in recognition of the public good they generate, so tax cuts and concessions will not provide any further assistance,” it said.
“Some support to date, such as the special conditions for charities accessing JobKeeper, has made a significant difference to many charities in the past few months. But government must create a ‘ramp’ not a ‘cliff’ for the end of JobKeeper.”
The paper called on the federal government to better support charities with “tailored” measures, and a range of other steps including:
- Tapering the overall rate of JobKeeper over time, including differentiated rates for part-time workers,
- Gradually increasing the scale of the revenue drop required to qualify, with appropriate baseline comparison rates and more regular checks on eligibility,
- Providing options for how organisations can average revenue changes over several months even if there are more regular, rolling checks, to account for the uneven income of many charities.
“In all these scenarios, a JobKeeper ‘ramp’ will not be enough on its own,” the report said.
“Without ongoing support for charities working to prevent social dislocation, many will not be able to deliver the outcomes we rely on them for, and the costs will be enormous. For example, Australia spends $15.2 billion each year because children and young people experience serious issues that require crisis services.
“To avoid distorting the system further, we should treat charities on the basis of their financial position. The more helpful approaches being looked at by think tanks and policy analysts link JobKeeper eligibility to the improving financial health of the charity, so that supports are gradually removed as charities get back on their feet.”
The report noted that one in 10 Australians work for charities, and are disproportionately female, work part-time or casually, and are lower paid.
“These are all groups that have been hit hard by the current economic crisis. Charities are also major employers in many areas where we expect growth in service demand in coming years, such as aged care, disability services, education and health,” it said.