Expect the unexpected in these crazy times
THE move this week by independents Rob Oakeshott and Tony Windsor to the Gillard side adds uncertainty to the small business sector.
THE move this week by independents Rob Oakeshott and Tony Windsor to the Gillard side adds uncertainty to the small business sector.
.These are the craziest economic times I have had to interpret in 25 years of newspaper writing.
The uncertainty that comes from the so-called "rainbow alliance" means it would be wise to warn: expect the unexpected.
Small business has now not only to compete with big business (think Coles and Woolworths versus smaller supermarkets) and deal with thoughtless governments at all levels with their red tape, but now there are independents who selected Labor in order to sustain their powerful position.
It has become clear that Oakeshott and Windsor selected the side less likely to rush to the polls again so as to maintain their arm-twisting position of strength.
Throw in the rising Aussie dollar, which is making businesses in our tourism sector despise our good fortune of having the minerals China wants, as well as the fact some employers are creating more jobs than expected, which puts more upward pressure on interest rates and growing reasons for business to feel apprehensive..
Earlier this week, the Australian Retailers Association hailed the Reserve Bank's decision to hold interest rates at 4.5 per cent.
Retailers know the minority government and what it might bring are just more negatives the sector does not need.
"Traditionally, consumers react to any political uncertainty by keeping their wallets closed and Australians haven't seen a minority federal government since the 1940s, so we need time to assess how they will react," ARA executive director Russell Zimmerman says.
The Westpac consumer confidence index has risen for two months in a row and retail has been up for two months. This has been linked to four months of the RBA on hold with interest rates.
But the ARA is not seeing consumers doing cartwheels and since the strong employment result for last month, when full-time jobs increased by 53,100, some economists expect more interest rate rises this year.
The ARA Consumer Spending Confidence report, which surveyed more than 1000 people last month, showed a lack of confidence in the economy.
"A rise in the cash rate would have signalled: 35 per cent of consumers reducing their spend on basic apparel and shoes; a further 38 per cent cutting back on luxury clothing; 45 per cent of consumers cutting back on dining out and entertainment; and a third of consumers reducing their spend on bigger items including whitegoods, furniture and home furnishings," Zimmerman says.
The Greens are now important to Labor and their policies include reduced tax breaks for high-income earners; estate tax on homes, farms or businesses over $5 million; a 50 per cent tax rate on incomes of $1m or more; support for the original resources super-profits tax; and a 33 per cent company tax rate.
Business confidence has now fallen five months in a row but if it can turn positive, that will show how crazy these times are.
Peter Switzer hosts Switzer on Sky News Business Channel Monday to Thursday 7pm & 10pm.
www.switzer.com.au/small-business