There are significant pressures coming onto the Australian economy from the RBA efforts to prop up the flow of foreign funds into our economy, in the face of the secret deals being done to decouple the energy train from the currency markets.
We are seeing some very contradictory trends. Consumers and many businesses are seeing good signs of recovery and are beginning to believe that the stimulus packages being preserved by Tanner and Swan may need to be cut back along the lines being pushed by Hockey. Stevens is hauling back expectations of cheap housing at the same time as government subsidies to first home buyers are being reduced.
There is a real concern on the part of the BRIC economies that they may need to drop the US dollar as a reserve currency to enable the Obama administration (and other governments) to pay off their stimulus debts in the next few years.
Collectively this means that we have the appearance of recovery, a rush to the head of confidence at the same time as the G7 financiers are signalling to the central banks to dump a bucket of interest rate hikes onto market expectations.
Banks are working out how to keep the lid on mortgage rates while ramping up their interest rates to small and medium business, under the excuse that their wholesale cost of funds are not coming down.
The price of gold is dramatically rising above the $1,000 mark as the US Government moves to enable a 20% reduction in their dollar to get their manufacturing and export economies growing. In the last year our exports grew by $92 billion (great news) but our imports grew by a hundred billion more ($195 billion) leading to the RBA plan to systematically curb that trend.
Together these moves should be taken as a storm warning for any business that takes the stockmarket and retail sales (cheap imports) as evidence that our economy is out of the woods. Just listen to the words of Kim Carr who sums it up with: “We can’t sustain this approach”. Watch Tanner’s moves to bring some reality into public sector expectations, and watch Albanese find ways to create planning delays on infrastructure spending until after the coming round of bi-elections in Bradfield and Higgins.
Gary Morgan says that the strength in the weekly Roy Morgan Consumer Confidence Rating has continued with a rise of 2.4pts to 127.3 – the highest Consumer Confidence Rating since February 2005
“Increasing confidence about the next 12 months is behind this week’s rise with 48% (up 5%) of Australians saying we’ll have ‘good times’ financially in the next 12 months and 47% (up 5%) saying they expect their family to be ‘better off financially’ this time next year – both at their highest since early 2005.”
“Recovery in measures of confidence was one reason cited by the RBA for its decision to lift interest rates 0.25% to 3.25% this week. However, there is good reason for cautions as the latest Roy Morgan September unemployment and underemployment estimate shows there are still 1.684 million Australians either unemployed or underemployed.”
This consumer pressure for recovery means that every smart entrepreneur needs to watch their back very closely, continue strenuous efforts to build exports and establish lines of credit for the second half of the financial year. We have lost the personal involvement of Dr Craig Emerson and his personal commitment towards making life easier for small business and we are about to face the realities of Ken Henry’s tax review that will place real pressures on import oriented business.
Expect to find more tax audits on expenses and less willingness to relieve the burden of BAS unless you are big enough to be operating in a number of states. Don’t doubt that size matters, but growth will attract more attention rather than less from the fiscal fiends in Treasury and the back rooms of your bank. Don’t assume that all this talk of recovery means that your bottom line will not be under significant pressure, that you do not need to redo your strategic and marketing plans and particularly, do not neglect to engage your key staff in your forward development plans in the Asian region.
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Dr Colin Benjamin
Entrepreneurship and Strategic Thinking Consultant
Marshall Place Associates 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
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