Coronavirus claims popular yum cha icon
A popular Sydney Chinese restaurant famed for its yum cha has collapsed as the sales slump from the coronavirus outbreak begins to claim its first major victims.
Parramatta Phoenix, based in the suburb's Westfield Shopping Centre, was placed into voluntary administration this morning. A related business, Darlinghurst Asian fusion restaurant Mister Dee's Kitchen, has gone into liquidation.
Christopher Darin, partner at insolvency firm Worrells, has been appointed voluntary administrator of Parramatta Phoenix Pty Ltd and liquidator of Mister Dee's Kitchen Pty Ltd.
"As we have just been appointed this morning, we are still in the initial stages of gathering each company's books and records to commence our assessment of the reasons for failure," Mr Darin said in a statement to news.com.au.
"However the director has indicated in initial discussions that one of the factors in the fall in turnover of the restaurants is a reaction to the coronavirus."
Calvin Chen, whose family owns the Phoenix Restaurant Group, told news.com.au his other locations - Sky Phoenix in the Sydney CBD, East Phoenix and E-Dragon Dumpling Bar in Zetland, Rhodes Phoenix and Brisbane Phoenix - were "all trading as normal".
Restaurants and retailers in areas with large Chinese populations have been particularly hard-hit by the outbreak, with Chinatowns in Sydney and Melbourne described as "ghost towns" since January.
Some restaurants have reported revenue falls of more than 50 per cent.
Andrew Spring, partner at insolvency firm Jirsch Sutherland, said he had "heard of a couple" businesses collapsing that had cited coronavirus but "generally speaking those businesses might have had some other issue" and the virus "may well have been the catalyst".
But Mr Spring said he expected things to rapidly get worse.
Jirsch Sutherland has set up a dedicated hotline - with Chinese language instructions - for affected businesses. It is currently getting around 10 to 12 inquiries a day.
"My suspicion is most people have working capital reserves to get through about a six-week period, which is where we're at, so it's going to bite into the future," he said.
"No doubt there's going to be some collateral damage. Even if things were to improve immediately, it's still six weeks of pain businesses have to recover from, so I suspect we will see a lot of businesses that are going to have this as the actual reason (for going under)."
Mr Spring said tourism, travel, retail, hospitality and IT were the most directly affected but he had even spoken to someone in the eyelash business who was struggling with supply issues.
"Every single business has totally different problems," he said.
"One I was talking to recently, it was a disaster-management scenario where their server had failed. They'd gone to try and find a new server, but due to the Intel plant being shut there was a two to three-month back-order to get a replacement. That's pretty damaging to a business when you don't have access to your information."
He cited another business, a deep-sea fishing tour operator on the north coast, who "has basically found his demand has disappeared pretty much overnight".
"The business had no real issues previously but obviously he has some fixed costs that need to be met," Mr Spring said. "He said, 'I can hold on for three months', but after that he needs to build contingency plans, rationalising costs with a view to either mothballing operations or (shutting down)."
He added that the end of this month was "more likely to be the point where we see the panic stations set in" as quarterly statutory liabilities such as superannuation come due.
Mr Spring said the government may need to step in, either with stimulus packages or other programs, particularly coming off the back of the devastating bushfires.
"Historically governments provide a framework within which commercial opportunities are fostered, whether successfully or unsuccessfully," he said.
"It seems to me if this is to persist it's likely that textbook needs to be thrown out."
It comes as the Prime Minister signalled work was well under way on a response to the financial impacts of the coronavirus, as he held a meeting with central bank chiefs.
With the coronavirus sparking fears of a global recession, the Reserve Bank is widely expected to cut interest rates to soften the impact.
Its board meets on Tuesday, a day ahead of the release of the latest quarterly economic growth figures, which economists expect will again show a sluggish expansion, even before the outbreak of COVID-19.
"This is a health crisis not a financial crisis, but it is a health crisis with very significant economic implications," Mr Morrison told Parliament on Monday, noting his meeting with the RBA governor and deputy governor.
"We'll be focusing on ensuring that we keep Australians in jobs, we keep business in business and we keep investment flowing during what will be a very challenging time for the Australian economy."
Mr Morrison said when the health crisis was over, there would be a bounce back for the Australian economy.
The tourism sector in particular faces losses running into billions of dollars due to the travel ban on Chinese visitors in an attempt to contain COVID-19.
The education sector is also bearing the brunt of travel restrictions.
Treasurer Josh Frydenberg, who also attended the meeting with RBA officials, told Parliament Australia was well placed to deal with the impacts from the virus.
"Our fiscal response will be considered, it will be responsible and it will be targeted," he said.
Shadow treasurer Jim Chalmers is open to a stimulus package to assist the impact of the virus, but argues the economy has been in desperate need of support for some time.
The national accounts for the December quarter are due on Wednesday, which will not include the full impact of summer's devastating bushfires either.
Economists at this stage expect the economy grew by a slim 0.4 per cent in the quarter, with some having marked down their predictions in the face of weak construction and business investment data last week.
While this will lift the annual rate to 2.0 per cent from 1.7 per cent as of the September quarter, it would still leave growth well below its long term trend.
Economists will finalise their forecasts after business, government spending and international trade figures early next week.
Treasury officials can be expected to be grilled on the growth result when they face Senate estimates on Thursday, having repeatedly had to downgrade their expectations in recent history.