The path to recovery

As equity markets get a severe attack of the jitters, retailers close their doors and Australian investors follow the lead of very different European and US markets, smart companies need to focus on their core business and look positively on both customer retention and customer creation.

Consumer confidence has been relatively steady despite the gloomy headlines and nightly focus on the likely Greek crash or the daily duels between Democrats and Republicans playing a game of fiscal chicken with the world economy.

Roy Morgan Consumer Confidence is still higher than the Westpac index, down less than one point (to 111.8) driven by responses to Australia’s economic prospects with fewer Australians (29%, down 2%) expecting “good times” for the Australian economy over the next 12 months and fewer Australians (36%, down 1%) expecting “good times” over the next five years.

Gary Morgan reports, “Continuing weakness on local share markets appears to be undermining confidence in personal financial situations with fewer Australians (28%, down 1%) saying their family are “‘better off financially’ than this time last year and fewer Australians (34%, down 1%) saying they expect their family to be ‘better off financially’ this time next year.”

For those who doubt the value of following consumer sentiment it is worth looking at consumer and business confidence as a leading indicator of customer behaviour rather than rely upon the swings and roundabouts of stockbroker’s evangelism.

Labour voters believe the world’s number one Treasurer, Wayne Swan, and are prepared to spend this Christmas, whilst Opposition supporters follow Joe Hockey’s call that we need an election now to give Tony a go. Either way the next few months will be turbulent even though the economy is really in great shape and the best couple of years for a decade are only a financial year away.

It is easy to become a depressed lemming rather than a positive leader if the volatility of the stock market is substituted for a steady hand on market presence and penetration. While the big issues of the carbon and mining taxes and on-shore processing of asylum seekers keeps the Murdoch press in print here, offshore there is much more interest in what Christine Lagarde, Managing Director of the IMF has to say.

The grand Lagarde took over from her hapless socialist predecessor only recently and told a Chatham House gathering, “I believe there is a path to recovery, much narrower than before, and getting narrower.”

“To navigate it, we need strong political will across the world. Leadership over brinkmanship, cooperation over competition, action over reaction. One part of rebalancing to secure recovery is shifting back demand from public to private sector, when the private sector can carry the load.”

Christine Lagarde identifies the challenges for the global economy. “Let me set out the principal economic challenges. The bottom line is that global activity has slowed, and downside risks have increased. At the same time, the global rebalancing of demand needed for sustainable global growth has stalled.”

“In key advanced economies, the necessary hand-off from public to private demand is not taking place. The fundamental problem is that weak growth and weak balance sheets – of governments, financial institutions, and households – are feeding negatively on each other. If growth continues to lose momentum, balance sheet problems will worsen, fiscal sustainability will be threatened, and the scope for policies to salvage the recovery will disappear.”

Lagarde explains: “The key message I wish to convey today is that countries must act now – and act boldly – to steer their economies through this dangerous new phase of the recovery. The world is collectively suffering from a crisis of confidence, in the face of a deteriorating economic outlook and rising concerns about the health of sovereigns and banks. All this is happening at a time when the scope for policy action is considerably narrower than when the crisis first erupted. But while the policy options may be fewer, there is a path to recovery.”

Smart companies have the choice of following the myopic path of what passes for our political leadership or striking out ahead of the pack to promote their business, introduce staff renewal programs and improve productivity as their own path to recovery over the next three months.

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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. Colin is also a member of the global Association of Professional Futurists.