Expectations effects

Every small business needs to prepare for significant volatility for the remainder of the year as the RBA and Treasury study the changing pattern of consumer and business expectations.

While the equities market is getting a bit ahead of itself, and large-scale commodities investments are creating an impression that there will be strong economic growth, the reality is that the optimism is not likely to be maintained in the second half of the year.

Many smart companies are holding back taking on more staff and placing their strategic effort on productivity improvements, technological upgrades and strengthening their customer relationship management.

Glenn Stevens wants to clamp down on those expectations before there is a significant jump in the nation’s terms of trade that would lift income, drive investment, push up asset valuations and enable Swann to bring in his austere Federal budget in May to curb the Barnaby/Robb debt and deficits mantra.

There is every reason to believe that the RBA will press the normalisation button in the face of the continuing pattern of investment in the rental stock market and rising levels of consumer confidence. The assistant governor of the central bank, Philip Lowe has indicated that upswing in business activity and spare capacity limitations, interest rates would “need to continue their gradual move towards more normal levels”.

This all has the effect of making it more difficult to gain an export advantage and has encouraged a speculative rush to raise the Aussie dollar against its US cousin.

Tanner is already using this as a call for discipline in the Ministerial ranks to shore up the claw back of the cash splash now that the world is expecting to suffer the withdrawal pains of their various stimulus packages.

Expectations effects are not a substitute for sound commercial operations and strategic thinking based on closeness to customers and investment in innovation and business development.

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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