Dean Pearson, Head of Industry Analysis – NAB gave a comprehensive report on the status of the economy. He started with the following points:
• Australia is one of 8 countries with a AAA rating
• Commodities are down 23% from two years ago
• The US has had the weakest recovery since the Great Recession.
• The EU struggles because it is not a true single market like the US.
• World growth is currently being driven by Brazil, India and China
• China’s growth is decreasing and has ceased to be export driven. Growth is now internal credit driven through urbanisation which has increased from 18% last century to over 50% today which has fuelled the demand for commodities.
In an election year, this was the Quote of the conference:
“We all know what we have to do, we just don’t know how to get re-elected after we’ve done it.” Jean-Claude Junker – Luxembourg politician.
Pearson believes that unemployment would increase to above 6% by year end. All the employment growth has been in the government controlled sectors of healthcare and social assistance. There would be a positive impact on GDP as the A$ falls through the value of mining exports with the multi-speed economy adjusting to a slower single speed one. He expected interest rates to fall with the A$ reaching 88c this financial year.
The population is expected to grow 1.8% this year with 60% coming from migration, but the consumer dependent sectors, mainly retail, will remain weak with consumer reluctance to spend and the higher cost of utilities.
Big investment will continue to dry up, with the only bright spot in the SME property and finance sectors. However, small growth is expected in dwelling prices.
The federal government was represented by the Small Business Minister, Gary Gray (also known as the Minister for Revolving Doors) Although invited, the PM did not attend (he did attend as Rudd 1.0, Gillard never attended) perhaps reflecting his priorities.
His first focus was on the government’s long awaited response to the Franchising enquiry, which was to largely accept its recommendations. While this is welcome, the COSBOA summit is really not about the franchise industry. Along with other politicians, he talked about red tape elimination. Unfortunately, the example he gave was the repeal of a regulation that they had earlier imposed.
Gray also mentioned that the Small Business Minister was now a member of cabinet, but given this responsibility is just one of a laundry list of other much larger portfolios, I am not sure that this is a great leap forward.
The CEO of COSBOA, Peter Strong, gave an address about two issues that faced small business, the administrative burden of paid parental leave and superannuation. He regards these as government programs which should be administered by public service rather than just another diversion of business owners’ attention from managing their business.
More tomorrow. Part 1 here.
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Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
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