Thursday, April 12, 2012

The gloomy boom: a self-fulfilling prophecy?

A guest blog by BlueChipper Aideen McDonald
We continue to read in the media and hear from the banks that Australians are saving more than ever. This is a good thing, right? Apparently not, especially if you are an Australian business owner. Whilst we are all too aware of the effects over investing can have on the economy (think asset price bubble…and burst), the outcome of under investing has not been discussed so much.
BlueChip sponsored a CEDA event in Sydney today about Australian business credit – are we prepared for the cost of under investment?
Chairing the event, Carden, MD of BlueChip, cited businesses firing, rather than hiring; businesses saving rather than spending and paying down debt rather than borrowing…all leading to historic low levels of business credit.
The first of the two panellists, Joseph Healy, Group Executive Business Banking with NAB believes it comes down to the current market confidence (or lack thereof) businesses and business owners have in the Australian economy. Or, for short, so-called ‘animal spirits’, that perhaps have business owners more spooked than they need to be.
Healy acknowledged that whilst the Australian system has issues, it is a remarkably resilient, fundamentally strong economy.  A context that makes for golden opportunity – at least if you’re a business owner who is realistic about risk in the current environment, and confident when facing the challenges. Otherwise, he suggested a lack of business investment would lead to longer term problems like a weakened economy, higher levels of unemployment and a cycle that repeats itself.
Panellist, the Hon Patricia Forsythe, Executive Director at the Sydney Business Chamber, addressed the current accessibility of lending to businesses, highlighting that levels of lending collapsed during the GFC and have remained weakened ever since. Citing Sydney Business Chamber research, Forsythe suggested lowered access to business loans has stunted the growth of business investment.
Forsythe believes current government has a central role in supporting businesses during a time of low confidence and weakened lending levels, suggesting a review of the political scene in Australia to de-risk the system and highlight specific sectors that are in need of investment support.
Both panellists agreed Australian businesses need to focus on digital opportunities. BlueChip has advised clients on the social media and digital space over the past few years and is increasingly helping purely online businesses with both traditional and online PR & communication. Referring to Sydney as the key digital hub for Australia, Forsythe encouraged all businesses to embrace the movement into the digital space.
Healy cited an example BlueChip mentioned in a previous edition of PRognosis of Kodak: the demise of a leading brand in the world of technology due to their inability to adapt to a changing and growing world.
The bottom line is this: business owners and business people in Australia should take heart from positive economic signals. But while we all hang back on the edge of the pool, borrowings will stay low – and the overall economy, our customers and our people stand to lose.
If we get carried away by gloom rather than looking, carefully, for boom opportunities we actually risk creating a self-fulfilling (and negative) prophesy.  
Informed leadership will win out for those brave enough to dive in rather than spectate. 

The event was hosted by Angus Armour, MD and CEO of the Export Finance and Insurance Corporation and member of the CEDA  NSW State Advisory Council   

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