A Down Under Double Dip Recession?
I recently attended a very good Business Recovery and Insolvency conference on the Gold Coast in Queensland. There were a few international speakers (including me) and to get the Australian perspective on the ground there was very useful. The difference between the mood at this conference and the same forum 12 months ago was quite marked. The Aussies are rather bearish about their economic outlook for the next 12 months and we should be very mindful of this given that they remain not only our closest neighbour but our major trading partner.
A year ago they were congratulating themselves on being one of the few major global economies to have dodged the GFC bullet. The major reason for that was the strength of their mining industry and the value contributed to the greater economy from that sector. At that time the Chinese economy was growing exponentially and their demand for raw materials seemed insatiable. One speaker at last year’s conference did question whether that particular bubble was likely to be sustained and seemingly the answer is no.
The major mining state in Australia is Western Australia and 41% of that state’s exports go to China; the reliance on that market is therefore undisputed. The problem for the Australians is that the recent figures out of China indicate a slow-down and expectations are that the trading data out of China, due on 1 April will confirm that such slow-down is occurring. The immediate effect has been a strengthening of the Kiwi dollar against the Australian currency and that is not necessarily good news for us.
Less than a month ago, Reserve Bank Governor Allan Bollard came right out and said that the relatively high value of the Kiwi dollar is hampering our economic recovery. A further strengthening against our major export market’s currency is not good news for Kiwi exporters. The big question is whether this means a double dip recession for us and while any suggestion that this may occur will be both premature and knee-jerk reactionary, we do need to be mindful that our trans-Tasman cousins are not the picture of economic health they were a year ago.
At the conference it became clear that the Australian economy is definitely a two speed bike; mining is still healthy but other sectors including viticulture, retail and property look decidedly depressed.
It may well be time to look at how you are running your own business and remember that in times of economic turmoil, it’s the well run businesses that survive. Ensure you are getting the basics right and always manage your cash flows on a positive basis.
One surprise to me was how bearish the speaker from Singapore was. It appears that even that vibrant economy is slowing down and when he said that the Singapore economy was not in recession he did add the word “yet”
Another important point to emerge from the conference was that the PPSA is now up and effective in Australia so anyone doing business there should be aware that they need to register their security interests on the Australian securities register.
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