Don’t look back

The long, the short and the steady as she goes crews need to abandon the look back over the shoulder of euro-zone crises and US Super committee failures to progress plans for the second half of the financial year.

Overcoming gloom requires a commitment to innovation, creativity and renewal through productivity enhancements.

If consumers continue to be spooked by the Greek and Italian stories prior to the swapping of PMs, there is a risk that deep discounts and a continuing rise in household savings could prolong a slow growth outlook.

If, on the other hand, business and treasury leaders focus on the prospects for steady employment growth in the US (with over a hundred thousand new jobs created in the last month) and a reconstructed European banking system in the new year, there is every reason to see a renewed sense of business optimism.

The Gillard Government is optimistic that there will be a surge in tax revenues in a couple of years time as the costs of natural disasters are washed out of the budget as the two-speed economy gets bedded down across the economy.

A pre-Christmas rate cut in the light of continuing concerns about Europe would underpin good retail sales over the holiday season.

Andrew Mohl, former head of AMP and now CBA director, believes that there are signs of a solution to the post-GFC crises and the CEO who met with the Treasurer yesterday consider that Australia is relatively well placed at present if the Government sticks to its plans to achieve a surplus next year.

Consumer and business confidence results reflect last week’s drop in equity markets rather than the realities of a recovering US job market to be announced over the weekend, auto sales in November that showed that consumers are out there again and the overnight decision of six of the world’s eye shadow brigade in the central banks injecting liquidity into the global financial system.

The US Central bank worked with the banks of Canada, England, European Central Bank, Japan and the Swiss National Bank to release a lot of credit for small business loans and trade expansion. The US Federal Reserve is relaxing requirements on cash reserves to encourage new lending and assisting foreign banks to borrow from freshly minted US dollars at low interest rates to foster foreign trade flows.

The Central Banks said in a joint statement that they wanted to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses”.

The US Federal Reserve’s collection of regional branch reports from its board members and a private payroll survey provide evidence of a weak but growing US recovery with both low and high-end retailers reporting that customers are coming back. When these signs are converted into reductions in inventory overhangs and Christmas sales generate substantial cashflow, it is expected that there will be a nation wide expansion in new hiring.

In Australia, there is reason to believe that the decision of Wayne Swann to retain his dedication to a surplus and Glenn Stevens consideration of a further cut to interest rates should trigger a more positive retail environment. In reality the high value of the Australian dollar reflects the fact that Australia’s interest rate are still among the highest in the world leaving room for a rate cut to be the preferred form of stimulus by Joe Hockey if things go from better to worse.

The big concern for smart companies in the service industries will come from the efforts of public sector unions to demand job security and protection of their real incomes at the expense of independent contractors and small business consultants. There is a risk that small and medium enterprise will bear the brunt of both government and opposition efforts to use “efficiency dividends” and “cutting back Canberra” excuses for failures to cut middle class and corporate welfare.

The next few months should encourage a thorough revision of both business and marketing plans to revitalise product and service offers, meet with staff to find ways to increase productivity and look to the future rather than look for reasons to slow the pace of growth.

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.