Divided directions

Now is the time to plan for steady growth in consumer markets, especially those outside of the capital cities. Australia is well placed to thrive on a stringent RBA and a very divided parliament to ensure that smart companies can hold their prices and expand their market presence, especially with connections to emerging markets.

As we learn to live with the outcome of a national poll that sees the country divided between those that hate their state government and fear an avalanche of asylum seekers versus those that dream of costless climate change, small business will need to develop much more targetted and segmented business plans.

The banks are going to be even more demanding of information and access to the day-to-day trends of their customers as they plan for deflationary efforts of the central banks and the pressures on the investment industry.

Consumers are now back at roughly the same level of confidence that they had a year ago, but, according to Gary Morgan, only 28% believe that they are financially better off than a year ago. This week a slim majority, 53% (up 1%) of Australians, said now was a ‘good time to buy’ major household items and there was a strong rise in Australians expecting ‘good times’ economically for the country over the next 12 months (41%, up 5%).

Watch out, however, for massive cuts in staff at investment banks like Macquarie that are having difficulty to this divided world recovery. First half profit is likely to be dramatically reduced; the bank’s lowest September result in six years. Watch out for more US banks disappearing as the Republican Opposition freezes support for a new measure to bail out small business with tax credits and stimulus provisions that lets businesses immediately deduct up to $250,000 in capital investments.

The ACCC is doing its best to curb the growth of the banks that had the benefit of Wayne Swan’s guarantee that enabled them to find funds for the big end of town while clamping down on small business expansion. Its decision to once again deny NAB the chance to take on AXA is proof of a change in its sentiment since it let Westpac loose on the banks that were prepared to be more sensitive to small business requirements.

The best indication of the divided directions facing lenders can be found in the fortunes of McDonald’s. Like many small stores in the US it has had a tough few months but it has seen a growth in overseas sales, especially in Asia.

Companies that have spread their wings over the past decade are benefitting from the differences between their American and European markets and the emerging opportunities in China and the airline countries.

Smart companies that have built their customer base, addressed opportunities for innovation, creativity and entrepreneurship and cut their costs of doing business will now find that the banks are prepared to give them some slack.

Whereas banks were taking a very jaundiced eye on lending against cashflow in the past year, they will now be seeking to capture higher returns from small and medium businesses looking to expand or invest in new projects that have an offshore base.

Employers in growing economies will continue to take on labour, whereas in the deflationary economies the slow conversion from part-time to full-time employment will help the global retailers survive at the expense of smaller retail outlets.

We are in the best of times in Australia as the rest of the developed economies struggle to overcome the worst of times for decades. The key indicator for business planning will be the relative cost of wholesale capital to the banks and the level of unemployment in each country rather than the performance of the equities markets.

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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