The warning signs are clear and ominous.
Prime Minister Julia Gillard has warned of a larger than expected $12 billion shortfall in projected government revenues for the 2012/13 financial year, blowing a massive hole in the federal budget.
Meanwhile, respected policy think tanks such as the Grattan Institute are warning of the need for drastic and unpopular cuts to avert the possibility of “decades of deficit”.
It appears Australia is quite possibly approaching the end of an era where government deficit-funded stimulus programs kept the post-GFC economy afloat. How quickly that point is reached – and how savage the eventual cuts – will depend in large measure on the upcoming federal budget and the election in September.
Now you don’t need to spend too many hours polishing you crystal ball to see the shift away from stimulus and an eventual return to surplus will likely mean savage cuts to government spending or tax increases – or both – over the months and years ahead.
And, no matter how much the critters up in Canberra talk about ‘caring about small businesses’, any cuts or tax changes will almost inevitably hit SMEs and start-ups.
Well, Old Taskmaster says it might be a wise decision to start looking at how exposed your business is – directly or indirectly – to government spending cuts.
Remember your exposure to government spending does not just include your direct exposure, through things like tax write-offs, government grants or government contracts.
It is important to remember one of the largest sources of funding to state governments is through federal grants, so a contract with a state government body could mean an indirect exposure to the federal government. If you sell B2B, you might find one of your large enterprise customers has a large exposure to the federal government. Similarly, it’s worth remembering that any large-scale public service cuts are likely to have a major impact in Canberra.
So do you know how exposed you are to federal government cuts? Could your business survive losing a major contract? Do you have a strategy to deal with such a situation? If you’re not sure of the answer, it’s time to schedule a chat with your accountant.
Start planning now – and avoid a nasty surprise later.
Get it done – today!