Happy New Year???

I would like to wish everyone a Happy New Financial Year.

The coming year – 2011/12 – will offer the Australian and global economy many challenges and it is how we as individual business owners and managers, staff and the economy as a whole approach it that will impact greatly on what results we achieve in the coming 12 months.

The Australian economy is at a point where there is great uncertainty.  There would seem to be many changes on the horizon that have the capacity to impact profoundly on how business operates (this is not an exhaustive list by any means):

  • the carbon dioxide tax currently being developed;
  • the NBN roll-out;
  • the federal budget impacts of the global economy and how this will impact Australia’s balance of payments and tax revenues;
  • the impact of the Greens on overall government policy and legislation as they take control of the Senate from tomorrow;
  • the Australian Dollar and its impact on our exporters and importers;
  • the Greek, Spanish, Irish and Portugese economies and their impact on global credit markets; and
  • the lead-up to the US Presidential election late next year.

If I may be a bit political here, the federal government appears to be on a collision course with the Australian population.  As one commentator said on TV last night, it would seem that they have stopped listening to the electorate.  This is concerning on a number of levels – it will increase uncertainty and create a level of discomfort for many people.  In circumstances such as this, they tend to “hunker down” and not spend as they have deep concerns about their financial position in the near future.

The incumbent federal government has demonstrated over the past four years that it is somewhat challenged in delivering policy change and rolling out programs (witness the Building the Education Revolution, Pink Batts, Green Loans, Digital Set-top Boxes, Live Cattle Exports, Illegal Boat Arrivals, Fuel Watch, Grocery Watch, Solar Hot Water Rebate and Mining Tax debacles).  The design and implementation of the carbon dioxide tax is therefore very challenging in that this is an all-pervasive program which will impact the whole Australian economy.  As stated, this uncertainty will have a profound ripple effect across the economy.

The credit market is also concerning in that the final wash-up from the EU mess (Greece etc) may well lead to a collapse/constriction of the global credit market.  Not wanting to be overly bearish here, but there are issues with the EU bailouts that could cause the major banks to significantly rein in their risk appetites.  This would impact severely on normal business operations and can lead to a “shut-down” mentality.

Combine all this with the newly-minted (from tomorrow) influence of the Greens in the Senate.  Their policy positions are somewhat unusual in many respects in that they tend to lean toward a more socialist approach to government.  This is concerning as they will generally have the view that the rights of the individual are below that of the “collective” and the environment.  This, again, creates further uncertainty for business and investment decisions.  It will also see the passing of legislation that is more short-term consensus based as opposed to long-term outcome focussed.  Situations such as this lead to messy government.

On the up-side, the soaring Australian Dollar (back over $1.06 this morning) makes our imports cheaper but hurts our exporters.  With the mining industry currently doing terrifically well, we have the opportunity to build for the future via investment in infrastructure and the like.  The only issue is that our net debt position federally is getting worse by the day.  The mining boom really is giving Australia a two-speed economy.  Given the pain in the retail sector at the moment, it might even be a three-speed economy!  We get to see a lot of businesses and talk with a lot of business people around Australia.  The thinking (knowing?) is that things aren’t as good as the government says they are.  This issue needs to be very carefully managed from a macro sense federally.

Further up-side exists in the fact that uncertain times can create terrific opportunities where you are prepared to think laterally.  Many businesses will move in to “survival mode” and focus on cost-cutting.  This means their service levels will drop and they won’t be thinking about growth.  This will create additional opportunity for businesses that look to fill the gaps that are created.  We’ve undertaken this process in the past with customers and it has worked very very successfully.  If you’re a little bit contrarian in your approach, you can exploit some terrific opportunities.

I’ll post more on this in the new financial year.

I do wish you a successful and fun new year.  It will be challenging – your attitude, planning and execution will determine your results!  How you think and then implement will be critical.

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