Beyond the gloom

The world’s greatest Treasurer, Australia’s very own Wayne Swan, jets of to Paris today for the G20 finance ministers. And he’s got a stern message for the financial masters of the developed world.

“If the worst fears for Europe are realised this time, the impacts on our own economy could be just as severe as those in 2008,” he said in Parliament yesterday.

“That’s why international engagement is just as important now as it was at the height of the global financial crisis.”

Not exactly talking up the economy, Mr Treasurer, but there is little doubt that Swan is right. If the European debt crisis does spark a banking crisis – which has seemed likely for months now – the contagion will spread to Australia’s banks and our economy.

Despite small rises in consumer and business confidence in the last week, the situation in Europe means that the mood out there among entrepreneurs is clearly pretty gloomy.

But last night at PwC’s Master of Business dinner held in Melbourne, I was reminded by three inspiring business leaders that there are still plenty of reasons to remain upbeat and hungry for opportunities.

SmartCompany founder Amanda Gome hosted a great panel featuring Ian Robinson, CEO and founder of retail chain, Beacon Lighting, Bede Noonan of infrastructure firm Geotech Group and Smart50 member David Lundberg, managing director of Altus Traffic.

The main focus of the panel discussion was around investment. Despite the gloom in the economy, is now the time to invest in your business and get ahead of the market?

For Lundberg and Noonan the booming infrastructure sector means their businesses are experiencing strong growth and the rationale for investment decisions is relatively straightforward, although an extremely difficult industrial relations environment is causing more than a few sleepless nights.

But the really fascinating character was Robinson. Despite running a retail business, he was able to put the current market turmoil in perspective, having come through the 1989 recession with just a few dollars in his pocket.

He had two great pieces of advice. Firstly, he has learned the hard lesson that you should never, ever cut back on your marketing spend, even when the economy is struggling. Beacon spends 9% of its turnover on marketing and its dominance of its category ensures that competitors do not have a big impact on profitability.

Robinson’s second piece of advice concerned investing and expanding in a downturn. While he was quick to say that he was wary of any expansion strategy that would impact profitability, he says timing is crucial.

“If you are trying to get market share when the economy is going well and everyone is expanding, you are not going to get anywhere.”

Great point – what you do now will set your company up for the recovery. And the panel saw a number of reasons why an economic turnaround might not be too far away, including:

• Interest rates remain low and seem likely to fall in the coming months. This will put momentum into the housing and retail sectors, lifting overall confidence.
• The situations in Europe and the US cannot get much worse and will improve. This will also help lift the gloom.
• The Australian economy is extremely well placed, even if the mining boom came off. Bede Noonan made the great point that Australia sailed through the Asian financial crisis back in the late 1990s when the mining boom hadn’t even started.
• Dave Lundberg pointed out that sectors such as infrastructure, recruitment, technology and of course anything remotely connected to mining remain very strong. Firms that can leverage this growth can find big opportunities.
• All three men pointed out that Australian entrepreneurs have a great ability to stick to their guns and ignore outside “noise”. This has helped them continue to grow despite adverse conditions.

It’s inspiring stuff.