1JunThe Australian Economy: What’s Going On ?
Posted on 1/06/2015 by Nine2Three
Low inflation, low energy prices and low interest rates plus tax cuts for small business but an Australian economy which is standing still ! What’s going on ?
The Australian economy is refusing to shift into top gear because business and households are still fearful about the future. It’s still all about confidence, or rather the lack of confidence by households and business.
No one is spending, on a consistent or large enough basis, including state and federal government, to counter the downturn in the mining sector and impact of slowing Chinese economic growth. Undoubtedly, as a nation, we are experiencing challenging times with falling commodity prices, including iron ore and coal, having an exceedingly negative impact on our mining sector and many parts of the agricultural sector still experiencing drought. Nevertheless, we are in a far, far, far better position than during the global financial crisis or during the 1991 recession, when unemployment hit 10.8%.
The majority of businesses today have good cash flow and strong balance sheets, through adopting, during the past five years, well-structured management strategies aimed at lowering operating cost. However, most businesses are still not focused enough on growth initiatives, preferring to preserve cash and wait for signs the economy is expanding. Households are adopting a similar attitude, despite also having good balance sheets and being meaningfully ahead on mortgage and other debt repayments. No one is spending.
We are in a situation where businesses and households can’t see that many of the conditions for strong economic growth are already in place. We believe, now is the time to commence those long-held and long-considered growth plans. Recently, the Governor of the Reserve Bank stated “as a nation, Australian households, business and politicians need to stop waiting for someone else to fix their problems and get out there, spend, invest and hire”. Last month, the Treasurer Joe Hockey, after announcing a Federal Budget, fairly and squarely, aimed at small-to-medium business, stated “now is the time for all Australians to get out there and have a go”.
We believe steadily and slowing Australian business and households will regain confidence and start to spend again. Certainly, during the next twelve months, the east coast of Australia will experience a substantial pick-up in growth. However, the major beneficiaries will only be those businesses who are fully prepared for the next transition of the economy - the transition to growth. As the 2015 financial year rapidly comes to an end, the economy is in solid shape, so put plans in place to expand in 2016 and don’t be left behind when the better economic conditions arrive.
Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.
Posted in I Need an Economic Update
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