Economy

Confidence keeps rising… Kochie the champion… Cabinet role urged… Grocers react to Coles deal… Retail sales in May… Building approvals fall…

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Confidence just keeps getting better

The good times roll on. The latest ACCI survey of investor confidence shows that businesses are enjoying record levels of activity and sales. Expected levels of investment increased to its highest levels since July 1994. Further, wage growth has eased significantly over the past nine months.

The survey, covers 1204 respondents for April, May and June. Greg Evans, director of industry policy at ACCI, says business conditions have recovered strongly and are on track to deliver sound economic growth for the rest of the year. “The number one constraint remains finding suitably qualified staff. Four out of the top 10 consraints are linked with government regulation and taxes or changes involving three tiers of government.”

– Amanda Gome

On top Down Under

Be glad, very glad, you live in Australia. A comparison of small business professionals in the UK and Australia reveals startling differences. Australian small business professionals are enjoying much greater consumer confidence than the Australian population, reveals a SmartCompany poll done in conjunction with Roy Morgan Research. But British small-business professionals have far lower consumer confidence than the general British population.

In Australia, staffing was cited by 33% of respondents as the main issue facing business, followed by cash flow/revenue 13% and competition (12%). In the UK, 41% say tax or financial issues were the main issue while 30% believe that government interference and red tape is one of the main issues facing business today.

Almost 74% of Australian small businesses expect the stockmarket to rise in the next 12 months, while 57% of the British respondents expect it to fall. Both however agree on interest rates: strong majorities in both countries think interest rates are on the way up.

– Amanda Gome

It’s all about mates at the COSBOA awards…

Want to win an award at the COSBOA conference? Being a sponsor or a very close mate should do the trick. The COSBOA small business summit opened yesterday and last night with much fanfare, Prime Minister John Howard announced that David Koch was the Small-Business Champion at a gala dinner at the Sydney Hilton.

Howard told the summit that the Government understands what small business wants from it: a strong economy, lower taxes and less regulation.

The award was for outstanding support and advocacy on behalf of Australia’s small-business sector. But maybe it should also be for outstanding support for COSBOA, whose chief executive, Tony Stevens, is all over Kochie’s magazine My Business.

Now hit the COSBOA website and there is Kochie’s face and an ad for the magazine including this: “My Business magazine is a well-established monthly publication … My Business works closely with COSBOA in ensuring the success of the annual National Small Business Summit.”

Gee, you can say that again!

Should Kochie have won the Small Business Champion award last night? Is there anyone you believe should win it? Have your say.

– Amanda Gome

Small Business Minister in cabinet, please!

One good call from the COSBOA small-business summit was by chairman Bob Stanton, for the federal Small Business Minister to join cabinet, with no overriding portfolio. He says it is imperative that small business consult with the government of the day over price discrimination and divestiture law. “It will be imperative to have the Government committed to strengthening the Trade Practices Act with meaningful amendments to ensure at the very least, a playing field in which small business can prosper without fear,” he says.

– Mike Preston

Grocers’ reaction to Wesfarmers Coles deal

As the market gets used to the idea of conglomerate Wesfarmers swallowing retailing giant Coles, independent grocers are concerned about a further concentration of market power in the grocery sector.

The National Association of Retail Grocers of Australia (NARGA) released a report by PricewaterhouseCoopers yesterday that finds grocery market concentration in Australia is the highest in the world, with Woolworths and Coles having a combined total of almost 80%.

John Cummings, the chair of NARGA says the sale of Coles to Wesfarmers, which owns hardware chain Bunnings, will increase concentration of market power in the industry. He expects to see further downsizing of Coles’ workforce, and if Wesfarmers decides to expand the network it is likely to do so through acquiring independent grocers, and therefore further increase market share held by the two dominant players in the market.

The concentration of market power has implications for suppliers in the industry. Cummings says the big retailers gouging prices out of suppliers and put pressure on suppliers to close their Australian operations and buy cheaper imports. “You are looking a $74 billion manufacturing sector in food and grocery lines, half of this is sold through supermarket outlets so that’s close to $40 billion in the hands of two players.

“Many small food manufacturers need independent retailers to survive. The big companies don’t foster entrepreneurship in food manufacturing in this country.”

NARGA has endorsed the government’s proposed amendments to section 46 of the Trade Practices Act designed to strengthen the prohibition on predatory pricing but called for more reform. “We expect to be involved in ongoing discussion with the Government in a separate context about the remaining recommendations of the Senate Economics Committee for change,” says chief executive Ken Hendrick.

Wesfarmers has promised to engage in a big capital spending program of more than $1 billion a year on Coles’s supermarket, liquor and convenience store business, after the $20.8 billion takeover was announced yesterday. Wesfarmers says it will make sure shelf prices are consistently competitive, improve fresh food sections and customer service and make sure no products are out of stock.

Wesfarmers chief executive Richard Goyder rejected suggestions that he may offload one of the Coles chains. The deal has to win the approval of the Australian Competition & Consumer Commission.

What’s your experience as a supplier? Do you think that there is a concentration of market power in grocery and retail generally in Australia? What should be done? Email [email protected]

– Jacqui Walker

Retail sales fall in May

Retail trade turnover fell by 0.1% in May 2007, according to the latest seasonally adjusted figures form the Australian Bureau of Statistics.

The small fall was well below market expectations of a 0.7% rise and follows a revised decrease of 0.3% in April 2007 and a revised increase of 1.1% in March 2007.

There was weakness in all industry groups except department stores (up 1.8%). Clothing and soft goods retailing suffered the biggest hit, falling 2.2% in the month, with recreational good retailing also going backwards (down 1.1%). Sales in the food and “other” industries fell marginally (down 0.1%).

All states and territories except New South Wales (down 0.3%), Victoria (down 0.7%) and Western Australia (down 0.1%) had increases in the seasonally adjusted estimate. The largest increase occurred in Tasmania (up 1.0%).

– Jacqui Walker

Building approvals fall

The total number of dwelling approvals fell by 5.6% nationallty in May (following a strong rise in April). Private sector house approvals declined 3.2% in the month. Private sector other dwelling approvals fell by 10%.

New dwelling approvals remain considerably below underlying housing demand and the housing sector is tightening rapidly, evidenced by ongoing sharp falls in rental vacancies. Developer sentiment remains poor and the prospect of further interest rate hikes in the year ahead risk exacerbating the burgeoning housing crisis.

Some economists are saying that these weaker numbers, combined with weaker than expected retail trade figures, provide breathing space for the Reserve Bank of Australia making a rate rise before the election less likely.

– Jacqui Walker

Economy roundup

The Aussie dollar hit a record high this morning, trading to US85.99¢ before falling back to US85.65¢. Paul Appleby, CEO Asia Pacific, Travelex Commercial Foreign Exchange, says this newly created high is more than 20% above the long-term average of US71.24¢, prior to the currency being floated in 1983.

Australian businesses, particularly importers, have the ability at these levels to protect against the dollar moving back towards the long-term average of about US71¢, he says.

Meanwhile the US dollar was broadly weaker overnight amid fears of terror attacks and concerns regarding the US housing market. A report released showed a worrying deterioration in the US sub-prime mortgage market where loans are approved for consumers with a poor credit history.

 

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