While Kevin ’07 was the media tag for the former PM, Julia Gillard and Wayne Swan are operating an international tag team, trying to mediate between the world’s super powers currency wars.
Rushing from one international forum to the next, the top Aussie team has been supporting the IMF and Ben Bernanke to push for the roll out of stimulus packages.
At home we see the big banks make it clear that returns to their shareholders remains their first concern (not just the retention of salaries that are multiples of the combined pay packet of Tony, Joe, the PM and the Treasurer). The actions of the CBA and ANZ do however; reflect the reality that the currency wars and the commodity boom are combining to push up the costs of doing business for SMEs.
Smart companies that have been holding on to key staff, attempting to finance export developments and building their inventories are finding that US companies are increasing their competitive game by making the most of currency cost reductions and cheaper labour costs off-shore in emerging nations.
While there is a downward trend in unemployment levels, there is an increasing potential threat from the RBA’s constant attention to limiting domestic inflation while Timothy Geithner aims to inflate the new Republic in the States.
All this means that small business is going to have to work harder to offer attractive retail and customer services in Australia and face the reality of a 20% hike in costs for the next six months in their export costs due to these currency wars. Consumers are ready to spend if the service and ambience is attractive, but there is an emerging trend towards on-line purchases to make the most of the high Aussie dollar.
Gary Morgan reports there has been only a marginal decline in Aussie customer sentiment with falls of 1.8pts to 126.0, edging down for a second straight week after the RBA raised interest rates to 4.75% (up 0.25%). Nevertheless, happy days for customers seeking imports leaves Consumer Confidence only 4.1pts lower than a five year high of 130.1 in late October.
“The fall was caused by lower confidence about future economic conditions in Australia with 42% (down 6%) of Australians expecting ‘good times financially’ for Australia over the next 12 month and 43% (down 3%) of Australians expecting ‘good times’ for Australia as a whole over the next five years.
“Over the past two years the weekly Roy Morgan Consumer Confidence Rating has shown both of these future looking indicators are responsive to interest rate moves. This week’s fall in the number of Australians saying now is a ‘good time to buy’ major household items (59%, down 4%) also shows the immediate effect RBA interest rate decisions have on retail spending decisions by Australian consumers.”
Worries about the economies in the US and Europe and the success of Joe Hockey and Bob Brown’s call for an inquiry into massive bank profiteering, it is little wonder that customers are beginning to reassess their proposed holiday season spend, unless of course they are off on an overseas holiday.
We need to exercise some caution in next year’s business plans as Australians are becoming less confident in economic conditions over the next 12 months and over the next five years, and less confident about the buying of major household items.
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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.
Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
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