07 Feb 2012
Australian small business owners who borrowed and built up debt in 2011, often required to keep their doors open, are undoubtedly hoping the Reserve Bank kicks off its 2012 cash rate announcements tomorrow with a third consecutive decrease.
MYOB, a company that has provided business management software to more than one million SMEs, says even a 0.25% reduction in the cash rate - if passed on by lenders - will have a significant impact on these important GDP contributors as they struggle to cope with turbulent economic conditions.
MYOB’s Business Monitor research in late 2011 saw 38% of 1,000+ Australian SMEs report their revenue was down on one year ago and only 19% report an increase. Interest rates were one of their top three pain points, after fuel and price margins/profitability.
CEO Tim Reed says a number of factors are holding the SME sector growth at bay, including rates.
“Small businesses contribute more than one third of our GDP and employ more than five million Australians. Their health has a huge flow on effect that should not be ignored on cash rate decision day by either the RBA or the lending institutions they are repaying funds to,” he says.
“Hundreds of thousands of these operators are coping with their worst trading conditions in years. It makes good economic sense to ensure this sector, which accounts for 96% of businesses in Australia, is offered rate relief while facing a currency that won’t back down, higher fuel prices, financially cautious consumers, intensified competition from a global online sales environment and increasing red tape.
“Most business owners I know are still looking beyond these challenging conditions, persistently putting their heart and soul into achieving dreams of independent success. Supporting and recognising this passion and optimism is vital - SMEs are the engine room of our economy and are too-often overlooked.
“They need and deserve rates relief for three major reasons: so they can at least maintain a steady cash flow in their business and home life, so their customers have more confidence to spend, and to enable them to keep hold of staff. Our nation certainly doesn’t need another record year for business insolvencies or a rising unemployment rate.
“An even better result would be two or more rate drops in quick succession. This could allow business owners to move beyond simply keeping their operations afloat to investing in development initiatives such as expanding their employee base, broadening their product offering and improving their online footprint to compete more effectively. It could also encourage potential entrepreneurs to begin a start-up, taking their career and contribution to our economy into their own hands.”
Lenders also need to play their part and pass on any cash rate cuts to their business customers, says Mr Reed, adding, “Too often we hear about the home loan market’s competitiveness but when it comes to business loans, borrowers are given little choice and little attention in the form of rate decreases.”
Manager - Public Relations, MYOB
02 9089 9068 / M: 0407 450 860 / email@example.com
Established in 1991, MYOB is now Australasia’s largest business management software provider. Its 50+ products and services have been employed by more than one million businesses in Australia and New Zealand. MYOB serves businesses of all ages, types and sizes, delivering solutions that simplify accounting, payroll, client management, websites and much more. With a network of more than 20,000 accountants and other professional partners, it provides the support and tools that help make business life easier. Today, MYOB is extending its solutions online and delivering innovation through cloud computing, enabling clients to make smarter connections with their business partners and customers: http://myob.com.au/smarterconnections.