Economy

CEDA pat on back for SMEs… Do Not Call grey areas… Govt grants go green… SMEs are bulls… Power cost pushed up by drought… Fairness test details hope

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SMEs the bright spot in CEDA export report

Supply constraints have stopped Australia taking full advantage of the resources boom and caused export growth to slump over the last six years, but Australia has increased its ownership of overseas assets, a new report reveals.

A Committee for Economic Development of Australia (CEDA) report by HSBC chief economist John Edwards shows that export volumes have grown just 9% since 2000, significantly below the 56% growth achieved in the preceding six years.

But manufacturing is one of the success stories, with exports increasing faster than the general rate of export growth. Edwards says it is likely that SMEs have been key contributors to the strong performance of this sector.

“We’ve done well in the areas where SMEs predominate. Big manufacturers such as motor vehicles have declined, but we have done well in precision instruments, very specialised machinery that’s specific to certain industries, pharmaceuticals and a number of other areas where small players can work,” Edwards says.

Declining mineral commodity exports account for almost half the drop in export growth, despite the China-led resources boom. Resource exports grew 2% since 2000, less than a third of the 6.6% growth achieved from 1994 to 2000. A decline in rural (because of the drought) and service exports, contributed the other half of the export decline.

The report says that higher prices for resources have disguised the fall in export volumes. Export bottlenecks in the mining sector are primarily responsible for the decline.

But there is some good news to come out of the report, with Australia increasing its ownership of overseas assets by $200 billion in the past 10 years. Australian’s currently have $286 billion invested overseas, just short of the $312 billion foreign entities hold in Australia.

The typical Australian globaliser is a business that has been successful here but needs access to overseas markets to grow. Edwards says they are often mid-sized businesses that are dominant in their market sector with strong IP, marketing and management skills.

“They’re very good at what they do but they need to go offshore to grow. This is a very typical pattern; they are often SMEs at the very beginning and then they expand by going global,” Edwards says.

– Mike Preston

 

Do Not Call grey areas

With the introduction of the Do Not Call Register barely two weeks away, it appears most small and medium businesses are now aware of the register.

The SmartCompany poll of SME Opinion Leaders done in conjunction with Roy Morgan Research and Dun & Bradstreet, which surveyed at 421 businesses, shows that 90% are aware of the Do Not Call Register.

About 10% of respondents believe the register would affect their business in a negative way, while 14% felt it would benefit their business and 76% felt it would not affect their business in any way.

But Paul Kallenbach, senior associate of technology and communications department at Minter Ellison, warns there are still grey areas.

From 31 May, it will be unlawful to contact someone whose mobile or home phone number is listed on the register unless implied or expressed consent is obtained.

Implied consent is one “grey area”. A business might think the customer has given consent, but in fact they have not. “For example if someone gives you a business card at a social function, could you reasonably imply they are giving you consent to be contacted?” Kallenbach says.

The safest way around this is to have a written contract with the customer. For example a business might include in its terms and conditions indefinite consent to be able to contact the customer.

Businesses also need to be careful when writing contracts with telemarketers. “The legislation does require businesses to include certain things within the contracts,” he says. If the legislation is breached, both businesses and their telemarketers are potentially liable.

Kallenbach also warns there is already a lot of overlapping regulations in this area. The Australian Communications and Media Authority has also issued industry standards stipulating the hours calls can be made, and ways to convey information such as the purpose of the call (go to ACMA’s website). 

These new standards are expected to dovetail with the new Do Not Call regulations. “And there is a whole bunch of state and territory regulations, so there is quite a lot overlapping in this area,” Kallenbach says.

He also warns that while there have only been one or two cases under the Spam Act (which is very similar to Do Not Call) that have gone all the way to the Federal Court, there have been plenty of fines and “slaps over the wrists”.

ACMA is treating this all very seriously and people will get a slap and be fined for breaches, he says.

Meanwhile Queenslanders can now register for Do No Call by calling 1300 792 958.

– Amanda Gome

 

Federal Government grants to go green

Small Business Minister Fran Bailey has announced an $8 million initiative to help companies go green. Recent surveys showing that most small and medium businesses do not see reducing their carbon emissions as a key issue – and they don’t know what to do about it. See our story for details.

The Government will pay training providers to help small business with recycling and energy efficiency initiatives. “Going green is good for small business,” Bailey says. “Not only can small business achieve substantial cost savings, they can also do the right thing by the environment.”

The funding is available under the Government’s Building Entrepreneurship in Small Business program.

– Jacqui Walker

 

SMEs are bullish: SME Opinion Leader Poll

It is often said that small and medium business are the barometer of the economy. Business owners who work so closely to customers and suppliers are expert at picking any changing shifts in business conditions.

So it is interesting to note that the SmartCompany SME Opinion Leader Poll of 421 companies paints an extremely optimistic SME community, looking ahead for both business and investment opportunities.

The poll, done in conjunction with Roy Morgan Research and Dun & Bradstreet, shows consumer confidence among the opinion leaders was markedly higher than the general population, although 85% of respondents believe interest rates are heading up and 39% of those believe it will be in the next six months.

Nearly 33% say staff issues are the main issue facing their business today, followed by revenue and cash flow (19%) competition (13%) and expansion or growth (12%).

Nearly three quarters also expect the market to rise and these keen investors are most bullish about shares. The majority (85%) expect shares listed on the Australian Stock Exchange to be a good investment over the next 12 months. Other good investments include shares in private companies (70%) commercial property (69%), shares listed on overseas stock exchanges (68%) and commodities such as gold and silver (66%).

– Amanda Gome

 

Drought could push electricity prices higher

SMEs face the threat of higher electricity costs as the drought drives up production costs for electricity generators, a leading economist says.

Electricity generators that need water to power steam-driven turbines have been hit by water shortages, as have hydro-power generators.

But increased costs for power generators does not necessarily filter directly to consumers because prices are regulated in each state. In most states the price electricity retailers can charge is set by an independent statutory authority. The only exception is Victoria, where the regulator controls prices levied by electricity generators and distributors by a licensing system.

Regulators in NSW, Queensland, South Australia and the ACT are all due to review retail electricity prices this year. They are reported to be coming under heavy pressure from the electricity industry to increase retail prices.

Australian industry group chief economist Tony Pensabene says while manufacturers in the steel, petrochemical, plastics and food sectors will be the most affected by a significant price rise, electricity is generally the biggest utility cost component for most businesses.

He says businesses that have agreements to purchase energy directly from distributors or retailers will be hardest hit by rising prices.

“Prices on the wholesale electricity market have gone up because of the drought, but a lot of companies will be on contracts, so the issue for them will be when those contracts expire. If they are only on a one-year contract, they could be affected by increased prices,” he says.

– Mike Preston

 

Business hopes for fairness test detail as Parliament sits

Legislation to give effect to the Government’s AWA fairness test is expected in the coming weeks as Federal Parliament returns from its post-budget break today.

Business has been left in the dark on the AWA fairness test after the Government rushed to announce the test would take effect before legislation was introduced.

Workplace relations minister Joe Hockey has previously indicated legislation to implement the AWA fairness test would be introduced around the end of May.

In other IR news, Labor has confirmed that it will not change employers’ common law right to take legal action to recover damages caused by illegal industrial action.

Opposition IR spokeswoman Julia Gillard told The Australian Financial Review “it is appropriate for parties who are being damaged by industrial action to have full legal rights to seek remedies”.

– Mike Preston

 

Economy round-up

Shareholders in Slater & Gordon, the first Australian law firm to list on the ASX, will be happy this morning with the shares trading at $1.335 after opening at $1.32.

The S&P ASX 200 is up 0.7% at 12.40am to 6254.3, while the Australian dollar is trading at US82.36c, up from the last Sydney closing price of US82.25c.

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