Take a longer-term view

Glenn Stevens faces a continuing concern – to recognise that the big banks are going to continue to put downward pressure on lending to the domestic housing market and small business expansion to clamp down on an inflationary surge, while Ben Bernanke is printing money to counter a US continuing deflationary deterrent to growth.

Australian small business should not be panicked into thinking that the RBA intends to introduce another major credit squeeze to curb the impacts of the second mining boom.

The Chinese will reduce their domestic growth (food and energy prices) but will not concede that they are planning to help Obama to expand his export economy. The Europeans will bail out Ireland, Portugal and Spain as they did with Greece. The world economy will grow by around 3% next year and we will continue to have major opportunities to cut the cost of imports at home and gain market share in emerging economies.

The nation is facing a massive increase in investment in the resources economy that makes long-term consolidation a necessity at a time when the Europeans are forced to make savage cuts in the public payouts. Double digit unemployment and under employment over there is matched by skills shortages and falling rates of unemployment here.

As ACOSS points out now is the time to return the social security benefits to those that were set by previous Labor Governments rather than encourage a further increase in discouraged workers who claim disability benefits.

The public is obviously being manipulated to accept a lower standard of living, higher health insurance costs, and reduced retail consumption in the interests of the big mining interests still fighting a resource rent tax. We are all aware that the RBA has been relying upon the bank bosses to ride the storm over their huge personal payouts and extend benefits to their shareholders at the expense of retail customers.

Last week we saw a staged delay in a steady rate rise with the NAB (+ 0.43%), ANZ (+ 0.39%) and Westpac (+0.35%) all increased their variable mortgage interest rates by significantly more than the RBA’s (+0.25%) increase on Melbourne Cup day the week before.

Smart companies will not be fooled by the gyrations of the RBA in its minutes and notes that one day suggest that the big banks are helping them curb inflationary pressures and the next suggest that the world economy is heading for the cliffs.

Gary Morgan reports “Consumer Confidence has plummeted 7.8pts to 118.2 — the lowest since June 12/13, 2010, after the banks had duly hiked interest rates considerably higher than the RBA interest rate increase of the previous week. These rises are likely responsible for this week’s steep fall in Consumer Confidence driven primarily by a fall in Australians saying now is a ‘good time to buy’ major household items (54%, down 5%) and an even larger fall in Australians expecting ‘good times’ for the country as a whole over the next five years (36%, down 7%) — both worrying signs for retailers heading into the important Christmas sales period.”

Taking a longer term view will enable small business to plan ahead to get ahead by rewarding loyal customers with great terms of trade, preparing detailed growth plans for the coming year at home and overseas and accepting that there will be wage pressures to keep the best staff over the next few months. Building the business is the best path forward rather than following the patterns set in the equities markets from day to day.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.

Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099