Down to the roots

As Glenn Stevens moves to repeat the pattern of interest rate rises that gave Swan his mantra about serial increases in Howard’s era, we are now able to confirm that it is neither a V shaped recovery or a W shaped boom and bust.

The reality is that the RBA and Treasury are conspiring to create a root symbol economy, with the upsurge being hit squarely on the head with a combination of both fiscal and monetary policy aimed at limiting imports and expanding exports by smart companies. The aim will be to drag back the stimulus packages and force business to fight for funds if they are focussed on living off the federal funding programs.

The RBA will try to manage up the rates with a mixture of .25 and a .5 rise so that consumers are treated as boiled frogs by the time that they have seen their mortgages return to “more normal rates” without jumping out of the pro-Rudd euphoria about escaping the worst of the GFC.

Stevens may be concerned that rising confidence of Australians about going shopping may lead to a dramatic surge in imports by retailers anticipating a great Christmas shop, while domestic manufacturing is not showing signs of significant increases in forward inventories.

Gary Morgan points out that “despite the RBA’s decision to raise interest rates last week, the weekly Roy Morgan Consumer Confidence Rating (up 0.9pts to 128.2) has hit a new 4 1/2 year high – its highest since February 2005. A majority of Australians (53%, up 3%) say ‘now is a good time to buy’ major household items compared to just 17% of Australians that say ‘now is a bad time to buy’ major household items – this is the largest gap (36%, up 7%) between the two indicators since July 2007 as the world economy began to slowdown.”

The first major attack will be on lines of credit as we get the credit squeeze we are not supposed to know is being imposed. Christine Christian, the chief executive of Dun & Bradstreet, Australia and New Zealand has let us know that their lobbying has paid off. The Government has agreed to make lending to small business more difficult, while making the job of lenders easier by giving them greater access to SME credit records, histories and information about their business arrangements.

Christian claims that small business owners, who are traditionally reliant on personal credit to fund their business, will benefit greatly from this reform through an improved capacity to demonstrate credit worthiness and gain access to more traditional lines of business credit.

The new system will allow lenders access to information on applications for credit that have been deferred or turned down and give access to personal use of bankruptcy or other means of managing the credit status of home based enterprises seeking to expand their business enterprise.

At the same time, Ken Henry is touting changes to the tax system that may include a business expenditure tax, tighter control over exemptions and new forms of consumption tax. Look out for more scrutiny of corporate credit applications and use of credit information to assist the fiscal fiends undertake scrutiny of credit based expenditures.

All of this means that smart companies that can document plans for export expansion and cut back on credit required for imports will be encouraged by policies to iron out market volatility.

This ensures that strategic plans for an expanded marketing effort in 2010 should be on the cards, with the support of angels and investors looking to take up the realities of greater credit access and consumer confidence.

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Dr Colin Benjamin
Entrepreneurship and Strategic Thinking Consultant
Marshall Place Associates 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