What a difference a year makes
Friday, 18 July 2008
By Colin Benjamin
Consumer confidence reports from around the world provided SMEs with warning bells that flagged a dramatic slump in world wide business trends that are not propped up by a resources boom. A year ago these early warning signs were regarded as unfounded challenges to the “she’ll be right” and “we’ve never had it so good” prognostications.
While the economists and statisticians continue to argue that we have not met their technical requirements for a big R, the household and small business sector has no doubt that things show no real signs that we have hit the bottom.
In America, consumer confidence has fallen to record lows and the Morgan Consumer Confidence Reports show that Glenn Stevens should already be considering a rate reduction rather than leave things on hold.
Reports from Britain and America show that falling house prices, tighter credit conditions for both businesses and households, falling global and domestic demand, rising food and commodity prices, and squeezed household disposable incomes, all indicate that banks have little room to support new business initiatives.
Meanwhile, public finances leave little room for the Government to offer help, and the manoeuvring room by the central banks to consider nationalisation of an ever greater list of failing banks and financial institutions means that the credit crunch will get worse for the remainder of this year.
If further evidence is required, even the discount stores are beginning to show that households are dramatically shifting not only their daily purchase patterns but also their big-ticket items like houses and cars. eBay has been showing increased profits but declining sales, as even this traditional source of bargains feels the crunch.
We are still waiting for signs that the ASIC and ASX are to be similarly called to account and action taken to place the public interest at the forefront – and the requirements for a genuine process of disclosure about borrowing other people’s shares to make private profits with the expectations that moral hazard will be offset from the public purse.
Despite the evidence that the crisis is being exacerbated by short selling, speculation by hedge funds, and the US Congress looking to integrate its regulatory system to make for greater truth, trust and transparency in the market place, Nick Sherry appears willing in Australia to believe that we do not need any such action here. What will it take to lift this on to Kevin 08’s agenda?
And when will the regulators decide it’s time to protect small business from predatory behaviour? The US has already banned short selling. But out regulators think it’s enough to simply say it shouldn’t happen!
Meanwhile SMEs must understand that as the credit crisis gets worse, they cannot rely on any assistance from banks unless they have very strong trade and credit policies. It is essential that huge attention is paid to credit management. We will come out the other end, but we are in for a very bumpy ride.
Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton.
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