Why the looming recession threatens Australia’s charities

Why the looming recession threatens Australia’s charities

But the looming recession (if we’re not already there) combined with the health crisis means charities face a fresh squeeze on three fronts: falling donations, a lack of volunteers and rising demand for their services.

Falling revenue

While some receive government funding, many charities rely heavily on donations to support their services: providing meals, counselling and housing. An economic downturn means higher unemployment and less disposable income. If your household budget seizes up and you struggle to put food on your own table, it becomes harder to donate so others have food on theirs.

Charities have had a huge jump in demand for food hampers.Credit:Dominic Lorrimer

After the global financial crisis in 2007-08, charitable giving by Australians dropped for two years in a row – by a total of 15 per cent. It took six years before the total amount of donations exceeded pre-GFC levels. A recent survey of 196 charities by the Fundraising Institute of Australia found more than half feared losing at least 20 per cent of fundraising this year. Events are the most affected fundraising activity for now, but charities worry about the drop in donations from individuals and businesses.

Volunteers stay indoors

Volunteers are the lifeblood of charities, especially smaller organisations. They help deliver critical services and provide charities with extra income by mobilising the community through fundraising. Many volunteers are older Australians who want to use the extra time on their hands to give something back later in life. But in a cruel twist, they’re also the most susceptible to COVID-19 and need to isolate. Lack of volunteers means charities are stretched on the ground delivering services, and their absence is felt on the budget as fundraising cash stops flowing.

The coronavirus pandemic has forced The Salvation Army to scrap its door-to-door Red Shield appeal, moving the campaign entirely online for the first time. Other charities are losing crucial dollars from cancelled community fundraising events such as cake auctions and fun runs, not to mention closed op shops.

Surge in demand

Perhaps most critically, charities face an onslaught in demand for their services. The snaking queues outside Centrelink last week were a visceral reminder of how quickly this crisis is unfolding. With unemployment tipped to triple to 15 per cent, it’s going to get worse before it gets better. Many of these people requiring help will have never relied on welfare before.

The queues outside Centrelink which sprung up overnight highlighted the surge in demand for welfare.Credit:Jason South

The federal government’s decisions to effectively double Newstart and providing a wage subsidy were critical steps in stemming the bleeding. But expanding the safety net won’t be enough to catch everyone falling through the cracks. It will be left to charities to pick up the pieces – an alarming prospect given many will be at breaking point.

On the foreign front, charities doing humanitarian work overseas face a further challenge. As our economy shrinks and jobs are lost, some donors will turn inwards and focus on local needs. A last week survey by the UK’s Charities Aid Foundation found respondents were almost three times more likely to support a local charity than an overseas one.

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But as the coronavirus crisis sweeps across Australia, spare a thought for our neighbours. Slow to spread in the Pacific so far, the disease is beginning to infect that region. A widespread outbreak would be catastrophic in a country like Papua New Guinea (or Indonesia for that matter). Australia’s hospital wards might well become inundated, but at least we have world-class facilities to begin with.

The outlook for charities is being closely monitored by the industry watchdog, the Australian Charities and Not-for-profits Commission. Acting commissioner Anna Longley says some charities have already seen a decrease in donations and she predicts increasing demand will exacerbate “stress” on their systems. Struggling smaller charities on the brink of failure might be pushed over the edge.

“If our largest charities have to suspend operations, that would be a terrible outcome,” Longley says.

However, if this scenario has painted a rather bleak picture, it’s also a bit misleading. There is good news: giving and generosity do not cease during crises. In fact, some people give more as they hear stories of others doing it tough. As we saw during a scorching summer of flames, generosity is a powerful force.

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And while cash donations to registered charities might fall, people will still give in other ways because humans are wired to help. As our society winds down people isolate, neighbours are establishing online networks to look out for each other. Restaurants are donating meals to the vulnerable. School students are writing letters to lonely aged care residents.

Back at Hope Dinner in Sydney’s CBD, Danny Salsbury looks at the queue of people lining up for a meal. It could easily be overwhelming. But having been homeless himself, he is grateful he’s in a position to help. In the midst of uncertain times, he hopes the community comes together.

“Be kind to others, whether that’s supporting your neighbour or a charity. Look after yourself, but look out for others too.”

Ross Gittins is on leave.

Josh Dye is a news reporter with The Sydney Morning Herald.

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