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Report calls for urgent reforms to support charities as analysis reveals charities could power post-COVID economic recovery

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A report launched by Social Ventures Australia (SVA) and the Centre for Social Impact (CSI) calls for reforms to support the charity sector as post-COVID recovery partners – following findings that charities are one of the largest employers in Australia.

The report finds that charities employ more people than the mining and manufacturing sectors combined, are key players in Australia’s economy contributing the equivalent of 8.5% of direct and indirect value to GDP, and could be an important source of job growth.

New modelling published in the report also reveals that under the revised JobKeeper payments 110,000 people employed by charities are still at high risk of becoming unemployed by September 2020, with a further 70,000 by September 2021.

“Taken for Granted? Charities’ role in economic recovery” report found that JobKeeper will keep many charities viable in the short term – but won’t be enough to preserve all charities, with 14 per cent at risk of becoming unviable and 44 per cent making an operating loss by September 2021.

Modelling was conducted on the basis of a gradual economic recovery, but the situation unfolding in Victoria reminds us that this is far from guaranteed.

The report is the third instalment in the SVA and CSI “Partners in Recovery” research series, following the Will Australian charities be COVID-19 casualties or partners in recovery?

A Financial Health Check report published in June and Partners in recovery: Why charities need tailored support published in July. The series explores the unique social and economic contribution charities make to Australian society and how they are affected by the confluence of service disruption, falling income, rising demand and higher operating costs.

This third report updates the modelling presented in the June report to explore the implications of the revised JobKeeper wage subsidy arrangements announced by the Commonwealth Government in late July 2020. It also presents new analysis on the economic contribution of the charity sector.

SVA Chief Executive Officer, Suzie Riddell, said that while people intuitively understand the role charities play in binding the social fabric of their local communities, they may not realise charities also make a sizeable economic contribution.

“Charities are the unsung heroes of our economy,” she said. “Charities employ more people than mining and manufacturing and they’re more concentrated in sectors with strong prospects for future job growth like health care, disability services and education.”

She continues: “Our charities give us strength and support when we need it. If governments implement some smart reforms, charities can also boost our economy when it badly needs support. But if we don’t take action and invest in this critical sector now, the impacts can be devastating in the long-term.”

“The financial modelling SVA and CSI has undertaken shows that if JobKeeper ends without additional investments and reforms the sector will still face dire consequences, with more than 40% of charities in operating deficit. The job losses that would result as charities either cut costs to survive or shut down altogether would be in the tens of thousands. Comprehensive reform is required to prevent this from happening,” said Riddell.

CSI Chief Executive Professor Kristy Muir said that we all need Australia’s charities to make it through this crisis in a financially viable position, and ultimately a more financially sustainable position than they came into it.

“Charities play a critical role in Australia’s community, society and economy. They provide essential services to the most vulnerable at a time of increasing need, they strengthen communities and society and, as our report outlines, they also contribute the equivalent of more than 8 per cent of combined value to Australia’s Gross Domestic Product. Their direct value-add is on par with retail trade,” she said.

Charities are key to jobs now and in the future. They employ 1.3 million people or around 1 in 10 workers. According to Muir, before the crisis, 75% of charity sector employees were working in organisations with an operating surplus. Only 3% were in organisations at high risk to their viability.

“The modelling shows that even with the welcome extension of JobKeeper, something that both our organisations have called for, 1 in 7 charities could still be unviable by September 2021 and 170,000 jobs could be lost,” Professor Muir said. “Job losses on this scale would be dramatic and hinder Australia’s ability to build back better in recovery. We can’t afford to take the role charities play in our economy for granted. Governments, philanthropists and charities need to work in partnership to ensure charities have a bright future.”

The report calls for an integrated package of six reforms under three directions to support viability of the charity sector:

1) Ensure financial viability of charities so they can continue their economic and social contribution

a. Monitor the impact of the JokKeeper ramp-down and adapt it if economic conditions worsen

b. Maintain and, where needed, increase funding for government contracted services delivered by charities

c. Make fundraising and philanthropic giving rules simpler to encourage giving

2) Building capacity to improve impact

a. Create a Charities Transformation Fund to transition organisations to the ‘new normal’

b. Support further research to better understand how to build back the charities sector so that they are funded for impact

3) Decrease demand for charity crisis services

a. Retain JobSeeker and other income support payments at a higher level

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