Economy

Wages, costs dent business conditions… Broadband uptake questioned… Business fail to act on energy… When it’s ‘time to go’… SME owner’s redundancy payout… more…

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Business conditions easing

Business conditions could be turning, thanks to rising wages and costs. The St George-ACCI Index of Small Business Conditions released today shows a fall 53.7 index points in the March quarter, from 53.9 index points in the December quarter.

Wages and other costs rose significantly over the March quarter with both indices growing at the fastest rate since the survey began in 1996. Profits and investment declined over the March quarter. Despite the moderation of these key indicators, sales and employment continued to grow soundly.

The performance of medium and large businesses has been much stronger over the quarter and the authors speculated that this is because more larger businesses are direct beneficiaries of the commodity price boom.

– Jacqui Walker

Broadband figures queried as Telstra steps up attack on ACCC

A further complication will be added to the fierce debate over broadband today with the release of a new study that suggests Australia’s use of high-speed broadband is much better than previously thought.

The study, by telecommunication analysts Market Clarity, says Australia ranks eighth among developed nations in its uptake of high-speed broadband. This contrasts starkly with a recent report from the Organisation for Economic Cooperation and Development that positioned Australia 17th out of the 25 OECD countries in broadband use.

The Market Clarity study says the OECD report is flawed because it relies on combined business and residential internet use data from some countries but not others, and inaccurate population projects that distort per capita broadband uptake results.

The improved broadband rating for Australia will comes as a relief to federal Communications Minister Helen Coonan, who is under intense pressure to deliver an announcement on broadband to counter Labor’s publicly funded $4.7 billion fibre-to-the-node proposal.

Labor has used the OECD report on numerous occasions to bolster its argument that massive public spending is required to urgently upgrade Australia’s broadband infrastructure.

Meanwhile, Telstra has stepped up its attacks on the competition regulator with a new series of full-page newspaper advertisements that ask ‘Why is the ACCC still allowed to say no?’ to Telstra’s broadband plan.

In comments today, Telstra’s director of public policy and communications, Phil Burgess, backed the ads, describing the Australian Competition & Consumer Commission as a “rogue agency that makes its own policies and follows its own will”.

ACCC head Graeme Samuel today rejected the criticism, telling the ABC that “the ACCC never buckles under pressure of this sort” and calling on Telstra to reveal the wholesale prices it would charge for access to its broadband network.

Labor communications spokesman Stephen Conroy also joined the chorus of calls for Telstra’s broadband plan to be made public, in a speech to the Australian Telecommunications Users Group today.

“The secret negotiations between Telstra and the ACCC and now Telstra and the Government have created wide spread industry anxiety and distrust,” Conroy says.

– Mike Preston

Businesses fail to act on energy:

Australian companies are failing to act on reducing energy costs when compared to their counterparts in other countries, despite severe drought and signs of climate change. Companies in South Australia have done the most to date to manage their impact on energy and the environment, followed by Victoria, Queensland, NSW and WA, according to a report from Grant Thornton, which looks at 7200 business owners in 32 countries.

The reason is obvious: Australian companies are ranked as least likely in the world to be impacted by the cost of energy. Europe appears to be more affected, with five of the region’s top 10 countries citing energy costs as a prime concern.

However, only 18% of Australian businesses see energy costs as putting pressure on their business.

Where Australia lags:

  • Only 47% of companies have reduced their energy consumption, compared to 59% globally.
  • 58% of businesses globally have undertaken an energy review to understand how they may be wasting energy (53% in Australia).
  • 59% of businesses have reduced their energy consumption (47% in Australia).
  • 22% of businesses have considered relocating to reduce transport costs (11% in Australia).

Where Australia leads:

  • 60% of businesses have put in place measures to ensure that all computers and electrical equipment is turned off (65% in Australia).
  • 44% of businesses have invested in fuel-saving equipment (46% in Australia).

But a rethink maybe on the cards, with reports that Australian manufacturers face power price increases of up to 100% as the drought cuts into power supplies.

– Amanda Gome

When is it your ‘time to go’?

You have been running full-pelt for years, building your company, its brand and profile and it is about to morph into a medium-sized enterprise. But are you the person to take it to the next stage?

This is the issue entrepreneur Naomi Simson of gifting company RedBalloon Days raised in her blog last week. She wrote that she “might be getting in the way of continued, sustained growth of the business”.

New research released by Shirlaws might give some insigts to her and other entrepreneurs grappling with the same issue. It says that half Australia’s CEOs are not doing the job they are employed to do. Jeff Herrick, chief executive of Shirlaws, says: “CEOs and business owners start their businesses because they love what they do. Yet half of all Australian CEOs… continue with hands-on duties at the expense of the business and company growth.”

In particular, problems arise when companies grow from SME to mid-tier: a shift occurs that requires a change in behavior from the CEO, often from business owner and implementer to manager and coach.

The report says a CEO should:

1. Manage the energy of the business (managing staff and their expectations of what’s happening and when).

2. Manage the context of the business (hold the line, withstand forces that are demanding change and instead focus how what they have already started before moving onto the next challenge or opportunity).

3. Coach, not play; that is, manage not do.

Meanwhile, many of SmartCompany readers provided Naomi Simson with a lot of encouragement and sage advice from which six main themes emerged.

Advice for Naomi Simson:

1. It’s time to rethink your goals. You have successfully achieved what you wanted and now it is time to extend your vision to the next stage. This may result in you leaving the business.

2. Don’t leave the business. You’re just burnt out; it’s time to step away for a break.

3. Redefine your role and leave the execution of the business to others. Restructure and change the way you lead the business by bringing in a general manager. Find a good mentor and start some long discussions with your senior leadership team.

4. Look to the future: understand your business goals better. Why you are growing? For the sake of it or with an end in sight like an IPO? This could be re-energising.

5. Stay with the business on a physical level but break free from it psychologically.

6. You could be bored: get the next project up and running while you’re considering what you are doing.

Go to Naomi’s blog tomorrow to see her solution

– Amanda Gome

SME owner claims redundancy when their business fails

A Victorian tribunal has upheld the right of small-business owners to give themselves a redundancy payout when their business fails, in a decision that could have widespread ramifications for small and medium business owners.

In the case, the director and owner of VBS, a Victorian satellite-dish installation firm, gave herself and two fellow directors an $18,530 payout when the loss of a key contract forced them to wind up the company.

The Australian Taxation Office, a creditor, disputed the legality of the payment, arguing that the company could not be said to have gone through an involuntary redundancy (as required by tax law) because the directors made the decision to wind up the company.

But Victorian Civil and Administrative Tribunal member Bruce Pascoe rejected the ATO’s argument. “It was a cessation of employment against her wishes, forced on her by external issues which, as a director, led to the necessary decision to terminate all employment with VBS.”

Pascoe also found that the size of the payout was reasonable as it was equivalent to what “an arm’s length employee with over five years’ service and management responsibility,” would receive.

The ATO has until the end of May to appeal the decision.

– Mike Preston

A tax break for big businesses spend on infrastructure

The Federal Government will introduce into Parliament changes to the tax treatment of public-private partnership (PPP) infrastructure and asset financing over the next four weeks, reports the Australian Financial Review.

The change is designed to stimulate new investment in the infrastructure industry because it will allow infrastructure asset owners to claim depreciation tax benefits if they have a substantial economic interest and bear significant commercial risk.

– Jacqui Walker

Howard stays down in polls

Today’s Newspoll shows Prime Minister John Howard and the coalition is still lagging behind Opposition Leader Kevin Rudd and Labor in popularity despite a well-received budget, a backflip on WorkChoices and big spending on education.

On a two-party preferred basis, the coalition has 43% support compared to Labor’s 57%. The poll also found that 60% thought the budget would be good for the economy, and only 12% thought it would be bad. But 26% said they were influenced by the budget to vote Labor, and 19% were influenced to vote for the Coalition.

– Jacqui Walker

Economy roundup

Retail property sales in Melbourne have dropped dramatically in value and number in early 2007, according to CB Richard Ellis data reported in the Australian Financial Review.

Only $37 million worth of retail property valued at more than $5 million was sold in the first quarter of 2007, well behind the more than $1 billion in property that changed hands in the March quarter 2006.

Office property sales of $195 million for the first quarter were also behind the $280 million achieved in the equivalent period last year. Industrial property is the only sector to perform better in 2007, with $155.82 million in the first quarter this year compared to $104 million in first quarter of 2006.

In residential property, Sydney renters are paying an average 6.7% higher rent this year due to very low vacancy rates in the harbour city. According to a new NSW Department of Housing report, some tenants are paying as much as 26% more in rent than they did last year. One and two-bedroom apartments are experiencing the fastest rental growth, the report says.

SME owners hoping interest rates will stay low can take some comfort from today’s lending finance figures from the Australian Bureau of Statistics. They show commercial finance commitments for March 2007 dropping 5% seasonally adjusted and personal finance dropping 1%, with only owner occupied housing finance increasing by a modest 1.7%.

But this data will be all but ignored in favour of this afternoon’s post-budget speech by Treasury secretary Ken Henry, which the market will go through with a fine-tooth comb for any hints that Henry thinks inflationary pressures could rise.

– Mike Preston

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