Time to start planning for recovery

Entrepreneurs flock to hear Phil Ruthven’s forecasts on the economy and where their industry is heading. After all, he is not a dry economist from a large institution, but is one of us – having founded and built a global company, IBISWorld.

So last November when he came out and explained to SmartCompany readers that Australia would avoid a recession in 2009-10, his comments, while at odds with many economists and experts, resonated with many readers.

But in December, Australia experienced a quarter of negative growth and most economists then assumed the March quarter would also fully suit, thereby fulfilling the technical definition of a ‘recession’.

Ruthven then told SmartCompany that he might be wrong: that Australia might have a recession. But if it did, it would be “very mild and shallow.” His comments were widely at odds with the growing number of pundits who by then were predicting a rerun of the Great Depression.

Last week, the March quarter GDP figures were confirmed. The economy had grown at 0.4% from January to March. There are other signs of recovery too, with China and the share market recovering, and some polls recording a small lift in confidence.

Strangely Ruthven isn’t crowing… yet. I caught up with him this morning and he told me that while 2010 will be much better, and 2011 will be a bloody ripper of a year, we are not quite out of the woods yet.

“We are at the bottom of the U and bouncing along the bottom. But daylight has appeared,” he says.

“The problem is capital expenditure might still drag us into negative territory in the April to June quarter and there is a chance – albeit a faint one – that July to September could also be negatively dragged down by the same poor capital expenditure results.

“But by December, things are going to pick up,” he says.

If his predictions are right, that’s great news for smart entrepreneurs who work months ahead.

Just think. Two years ago, when we knew the credit collapse was coming, we had no idea how bad it was going to be. Now we are almost out the other end.

And if Ruthven is right, the end is closer than we think and the recovery will be one hell of a ride. Start planning.