First came the interest rate cut. Then came the startlingly good GDP growth figures.
Smile guys – it’s been a bloody good week.
Now, I’ll admit that the news that the economy is growing at 4.3% has got me scratching my head a bit, but this a truly, really impressive result. Combined with the psychological boost of the rate cut, this GDP result will hopefully help to give confidence the rocket we’ve been waiting for.
But – and there had to be a “but” – while Julia Gillard and Wayne “World’s Greatest Treasurer” Swan are well within their rights to crow, there is still a little bit of me that has to say that the GDP result doesn’t quite gel with the spate of collapses and profit warnings we’ve seen in recent months.
When you take a hard look at the figures, there are a few things that stand out.
First, the states are growing at vastly different rates. The Northern Territory, Western Australia and Queensland are flying ahead, while Victoria and New South Wales are spluttering.
Second, there are clear differences between the sectors. Mining investment is powering along, but housing construction remains in a big hole. Household consumption leapt, but retail sales figures and retail results suggest that this is being driven by discounting – in other words, the GDP figures don’t suggest the retail sector is suddenly back in ruddy healthy.
To me, the surprise result underlines just how important it is for entrepreneurs to keep their ear as close to the ground as possible right now.
This GDP figure should be a spark to call customers, suppliers, colleagues and even rivals to find out what they are seeing and smelling in the market. Ask them what they make of the GDP figures and how it tallies with their experience.
While this GDP result suggests Australia’s economy is frankly flying, the sense I’m getting from entrepreneurs is that conditions remain very short term. Conditions and confidence can change very quickly.
Indeed, a number of economists have suggested the next quarter’s growth figures will be the really interesting ones, given the economy hit a speed bump in April and May, as the rest of the world did.
We’ll have to wait and see. Hopefully that prediction is wrong and the economy is powering along.
Whatever the official figures say, entrepreneurs need to build their own picture of their environment.
We’ve had a great reminder that the long-term fundamentals of the Australian economy – low unemployment, strong household balance sheets and a strong mining sector – are in place.
The question to ask is: “What do the short-term conditions in your market look like?”