It’s the $64 million question – when will the economic downturn finally end, and when will the Australian economy start to recover?
In order to try and answer this puzzle, SmartCompany asked 12 entrepreneurs for their judgements – and opinions varied wildly.
Retail king Gerry Harvey said just one week ago that he thinks the world is on the brink of the biggest boom it’s ever seen. “It’s just a matter of… we’ve just got to go through a little bit of a period, and then away we go,” he told the ABC’s Four Corners program.
Others are not so bullish. Lev Mizikovsky, the entrepreneur behind Tamawood Dixon Homes, is concerned Australia might be in for 20 years of tough times, citing Japan’s two decade slowdown as an example of what can go wrong.
Overall, the consensus is that we are in for at least 12 months of pain, with the first signs of recovery appearing in the first quarter of 2010, or perhaps slightly later.
That tallies with the thoughts of most economists. ANZ senior economist Katie Dean says the next 12 months will be tough for both businesses and the economy in general.
“We expect the Australian economy to slow throughout the rest of this year, and we’ll start to see recovery in some sectors of the economy in the first half of 2010,” she says.
“As to when the economy will start to recover fully – we expect this to occur in 2011.”
Commonwealth Bank chief economist Michael Blythe takes a more optimistic view, indicating the start of a recovery later this year.
“It will be late 2009 before any convincing signs of a self sustaining update start to appear. A lot of people say the average length of a downturn is seven quarters. If that’s right, given when the US slipped into a recession, we’re looking at late 2009 before something starts to happen.”
Company: GUD Holdings
I just think anyone that can predict that stuff at the moment would be pretty brave. It’s just so hard. But I can say that right now, at the end of February, our business is trading strongly and other business is trading strongly. I think February is going to be good also.
The last thing you want to do is make a whole lot of people redundant, I’d rather talk to them about cutting hours. Maybe it’s a year, maybe it’s a bit more, but it will come back.
People have to get their business model as best as they can and make the best of the market conditions.
My personal view is that I do think we’re in for a tougher environment for at least the next 12 months as a minimum.
But perhaps our perception as to what’s normal has been distorted for perhaps the past five or 10 years. You had a very rare set of circumstances occurring with the mining boom – that’s been an unbelievable period of economic prosperity.
Having said that, I think there are some areas with businesses performing quite well. The financial services market is a mess, but your more traditional businesses may be performing all right.
Company: Australian Businesswomen’s Network
It doesn’t matter when it’s going to end – it matters what business people are doing right now. Some of the fundamentals of business are become even more important now. Things like networking – connecting to people and those who understand what you’re going through.
We’re spending a lot of time teaching people how to use social networking tools to network straight from their desk. Think about cashflow, carrying too much inventory, leasing equipment rather than purchasing a computer – these are things they need to think about.
Company: My Net Fone
I’m not a financial wizard, I’m just being guided by what I see and hear – but mostly I think 2009 is going to be quite tough. It’s going to be a tough 12 months and then hopefully we’ll come out the other end in 2010 in a better position.
But as for our business, we’re doing quite well because people want to look for savings, and that’s what we offer.
Company: Harvey Norman
I think we’re on the verge of the greatest boom that mankind has ever seen. If you think that all those people in Asia are suddenly going to reach this standard of living and go backwards – wrong.
The world is going to get going again, and it’s going to get going like you’ve never seen. Now is it going to happen tomorrow? I don’t know. Is it going to happen this year or next year? Yes.
Company: Tamawood Dixon Homes
I’d say 20 years. Remember the Japanese market, that collapsed about 20 years ago, and so that’s the only example we have. Why would it get better? We haven’t even copped full unemployment yet.
It’s going to get significantly worse. I know people are writing, saying “well be fine in two years”, but I have not seen any evidence.
We had at one stage inquiries down 80% or 90%. It’s only down now about 30%. We cut our payroll by 40%, so it’s a lot less people looking for houses.
My gut feeling is that it’s only just started. Unemployment is going up, and it’s a question as to how high that goes. If you’re in a job, times are quite good, but there’s a lot of negativity that is affecting people’s habits.
Because we’re in food, the work never stops for us. We pick up sales, people tend to eat home more, and we pick up some of the floor from restaurants. We’re doing quite well. Everyone has to eat, no matter what. People tend to eat out less, and we definitely benefit from that.
Company: Coffey Mining
I guess at this stage I’ve prepared our business for a couple of tough years, and because of our exposure to the mining sector that’s been affected fairly early.
I think we’re further into the downturn than a lot of people realised. I think there was a phase of people being somewhat stunned, thinking about how to react, then going on leave over Christmas, and what we’re seeing now is a lot more realisation and response.
Company: Reckon Software
Sector: Information technology
There’s a light at the end of the tunnel, but I’d be lying if I told you when it’s going to be. No one knows. So it’s just going to be a matter of waiting.
One day we might find the economy will turn around; I don’t think you can turn around and say it’s going to happen here and now, but it depends on a lot of issues. We should improve in some time.
Company: Healthy Habits
I just hope they don’t get any worse, but certainly I have no idea. I think it’s no different than the last 16 years – there have always been peaks and troughs.
This is a market for the strong to get stronger and the weak will fall away. But as to when it will get better, I just don’t know. Over my time in business I’ve learnt there are no rules and you can’t estimate anything.
Company: Roses Only
We haven’t really seen a real downturn. December sales are actually up for us, February is looking up. Maybe what we’re not seeing is the opportunity for additional growth.
The flower industry has been a very resilient industry in downturns. It’s not dissimilar to chocolate and other feel-good gifts. It’s not a car, it’s not a new iPhone, it’s the average sales around the $100 mark.
I think a strong brand will always have people flocking.
Company: JB Hi-Fi
Simple retailers like us would have no idea. We just read the press and can only make somewhat of a guess of it. I don’t think any retailer would be qualified to talk about when it’s all going to end.
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