The Pulse

I’m not sure how business conditions have been for you over the past few months, but most business owners I’ve been talking to have found the past three months much tougher trading than the first half of the year.  That has certainly been true for the small businesses that I’m involved in – we’re fortunate that we’re still getting enough business in the door but we’re working a lot harder for it.

This is reflected loud and clear in the latest round of the MYOB Business Monitor Report.  Released today, it paints a stark picture of industry conditions for Australia’s 2 million SME’s, with only 19% of business owners reporting an increase in business revenue in the past year.  That’s compared with 35% who reported an increase the same time in 2010.

This had caused me to form a pretty sober view on what 2012 might hold.  The prospects in the US are bad and worse – either a long protracted period of no growth as the government winds back spending, with businesses and consumers forced to make up the shortfall, or a second recession if they don’t.  Europe doesn’t look much brighter with the prospect of Greece going bankrupt and pulling some of the continent’s largest banks down with it.  China is likely to keep growing because the politicians can’t afford for it not to – but is that sustainable?

After that depressing start to this post you may be asking “why did he title this post a silver lining, it sounds more like a storm cloud?”  There are a couple of reasons.

Firstly, the Carbon Tax was passed.  I think the bark of this tax may be worse than the bite.  I know all the arguments against it and I think it is a personal decision whether you support it – but what I hope can now happen is that it will stop being held up as something that will kill all economic growth.  It will have an impact – it is designed to – but it won’t kill our economy.

[Note:  I think this could have been a really good thing for the economy if some of the funds were used to remove payroll tax.  Why do we tax the very good deed of creating a job and providing employment and not the creation of pollution? ]

Secondly,  it appears as though the Reserve Bank understand that it is tough in business right now.  That people are scared that the world is about to get worse and aren’t spending.  This is making the world worse and is a downwards spiral.  We’ve lifted our savings rate from -2% to +12% – that’s a massive 14% of GDP that was being spent a few years ago and is now being saved.  We needed to save more so that’s good – but enough is enough – we also need to spend some of our money or more businesses will go under.  It seems like the RBA have heard this point and are now considering lowering interest rates.  Just saying this will help.

So, in my humble opinion, while the latest Business Monitor report shows confidence, revenue and optimism on the decline, the good news is that many business owners are becoming a bit more positive about the outlook for 2012.  I once heard an economist say that you should only ever believe that any economic metric has hit the bottom when there is a unanimous voice of despair.  Only when people believe there is no light at the end of the tunnel may things have bottomed out and will they start to build back.

The MYOB Business Monitor says business owners are pessimistic about Christmas trading.  This combined with an uptick in business confidence and retail sales reported in the past week make the optimist in me think we may have hit this point.

Here’s hoping.

Tim

Tim Reed | CEO – MYOB