Newsletter Articles

Simon Says – “Australians, pull your finger out”

“We live in a lucky country”. This sentiment has been around in Australia for decades but I think it’s appropriate to remind people. We’ve had months of doom-and-gloom forecasting and, for some people, the reality has equated to genuine hard-luck stories. For many however, the general sentiment is that it (the economy) hasn’t been all that bad. Well, with the release of fresh economic data during the last week confirming that Australia is (officially) the most robust economy in the world, I think it is time to stop all the speculating, the analyzing, and the worrying and actually got on with life.

Ben Cousins, the at times controversial AFL star, just might have been trying to give Australia a positive message during the week. Pull your finger out, Australia!

From late last year we started to hear stories of several large companies around the world announced that they were closing the doors following the US-Sub-Prime. Then leaders world-wide began making sweeping statements along the lines “…this is the biggest economic crisis our country has ever seen..”. The media did what they usually do and dined out on the topic and before we knew it we had created mass hysteria.

During the last month, the Federal Government released its latest budget. “The 2009 budget is very much pro- growth,” was CommSecs comment. “Overall the measures should support confidence, spending and profitability and give Australia the best chance of being the first developed economy out of the global recession.”

“In the grand scheme of things Australia has the lowest debtof any major economy, despite recent deficit increases. The latest budget allows Australians to be positive and remain optimistic about the future of the economy. The major changes to the budget mainly affect infrastructure, small businesses and first home owners.”

“The Government has announced a $22 billion ‘Nation Building’ infrastructure spending plan supporting the prospects of companies in the industrial sector, especially construction, engineering and transport firms. This will aid long term measures such as the building of roads, ports, railways, schools and hospitals.”

“Additionally the tax break for small businesses has been increased from 30% to 50% on the cost of eligible equipment. This means that small businesses can claim a 50% tax deduction on new assets purchased until 31 December 2010.”

“Furthermore the Government has extended the First Home Owners Boost for an additional six months. The grant will remain at its current rate until the end of September, and then will be scaled back to $10,500 for existing homes and $14,000 for new homes for the remainder of the year. The continuation of the grant will boost the recovery of the housing market and is also great news for the building industry, lifting the demand for new dwellings.”

This table shows exactly how well Australia compares to the rest of the world:

I attended another seminar during the month where the presenter, representing a reputable international investment bank, commented that he thought we were well and truly over the worst of it. Well, if what we’ve recently experienced is a bad as it gets, I’m amazed at the hysteria that was created. So much for “…the biggest economic crisis this country has ever seen…”!

Now, I’m certainly not an economist, but I dug up some stats of my own which all suggest to me that Ben Cousins is indeed right; Australia, we do need to pull our finger out:

• Our share market – The All Ords has increased from 3624 on 2 January to 3948 on 3 June (up 9%)
  
  
• The Aussie Dollar - $AUD has increased from US0.71 to US0.79 (up 11%) over the same period
  
  
• Interest rates – After the RBA slashed interest rates by 4% in a frantic attempt to stimulate the economy, in one of the best signs of how the economy has held firm, the RBA has kept rates unchanged for the last 2 consecutive months
  
  
• Credit Crisis - the initial challenge which banks world-wide had of raising funds to lend out appears to be easing. Each of the Big 4 Australian banks have recently been successful in raising large parcels of funds without the need for Federal Government guarantees
  
  
• Australian banks are lending money. If there weren’t businesses like mine would not be able to operate
  
  
• Australian property values have held firm. According to RP Data, the median Brisbane property value in April 2009 was $452k compared to $466k 12 months ago (hardly a ‘crisis')

Whilst I am not for minute pretending that we haven’t experienced challenging times, upon reflection of the events of the last 12 months it hasn’t been that bad. It has been a good wake-up call. Personally, I have treated this period as a time to take stock, review everything, and to identify any potential weaknesses within the business. Our industry, finance, has probably been affected as hard as any industry but it is certainly not “doom and gloom”. I go back to my question in previous articles “… is the glass half full or half empty”? There are still opportunities for anyone who wants to be positive and there will be Boom times ahead!

So, our I think our ‘friend, Mr Ben Cousins, is on to something. Get on with it, Australia!

*Resources – CommSec “Economic Insights” May 12 2009. RP Data. ASX