Wild swings a time for the brave

CAPPING off one of the wildest weeks in equity and bond markets for some time, ANZ chief Mike Smith labelled the swings as a “correction in both directions”.

CAPPING off one of the wildest weeks in equity and bond markets for some time, ANZ chief Mike Smith labelled the swings as a “correction in both directions”.

But this has broader implications. Investors are nervous and business, which has been channelling more and more profits into dividends over building out capacity, is unlikely to change its outlook. Unsettling the markets has been the timing around the looming end to the US Federal Reserve’s massive quantitative easing program. This presents another uncertainty for business that is already negotiating the terrain of a slowing China, Middle East tensions and now the gnawing risk of an ebola-linked global health pandemic.

Speaking at The Australian and Deutsche Bank Business Leaders Forum, Wesfarmers’ group commercial director Ian McLeod says consumer confidence remains in a fragile place and it is likely to stay that way.

Indeed, McLeod — a career retailer — noted while consumer confidence may rally from time to time “the underlying trend has been a reducing level of consumer confidence for about six or seven years”.

McLeod told the Business Leaders Forum that even the chefs in one of the Coles-owned pub chains across Queensland didn’t need to be an economist to interpret the economy.

“If there’s an interest move the chef can see the effect that night; people actually don’t come in for a meal. It can be as simple as that,” McLeod said.

“More broadly, ever since the global financial crisis hit, the consumer has become more cautious about how they operate their own personal affairs, and certainly disposable income remains challenging,” he adds.

He notes business confidence is impacted by consumer confidence, and business has been very low for a long time.

But amid this uncertainty Margaret Jackson points out this is time for the brave. Jackson, the Spotless chairman and a former chairman of Qantas and Flexigroup believes there are “pockets of opportunity” for business not only here — but around the world.

“If you look globally it’s that the UK and Europe, I think, have got some very interesting opportunities. When you go the UK it seems incredibly buoyant compared to everywhere else I’ve been in the world over the last year. And I think in Europe there’s some quite interesting opportunities,” Jackson says.

ANZ’s Smith sees the future for the Australian economy closer to home: China. Is Smith worried about implications for Australia in China slowing its economy to a more sustained pace? “Not at all,” he says.