Economic outlook 2009
If your cash flow is under pressure, you’re not alone. Australian economic growth has slowed markedly in recent months. With consumers borrowing and spending less, business owners around the country are starting to feel the pinch.
Consumers are nervous
The global financial crisis is partly to blame. Falling financial markets saw the All Ordinaries Index fall by 43% in 2008. This was the biggest calendar year decline on record — by comparison, the share market fell by 33% in 1930. As a result, many Australians have seen their wealth significantly impacted. Combined with a seemingly endless string of bad news, that’s severely dented consumer confidence.
Cash flow pressures begin to bite
Stagnating consumer confidence could undermine your profits. In the November 2008 Commonwealth Bank/ACCI Business Expectation Survey, indicators of sales revenue and profits were at their lowest levels since the survey began 14 years ago, with 42% of businesses expecting profit growth to fall. And Dun & Bradstreet reported in January that businesses are taking longer to pay their bills, with average payment terms blowing out to 56.5 days during the December 2008 quarter. That suggests cash flow pressures are beginning to bite.
But household budgets have been boosted
But it’s not all bad news. The federal government’s economic stimulus package has boosted household spending power, while Australia’s 8.3 million home buyers benefitted from a 4% fall in interest rates between September 2008 and February 2009, with the potential for further falls this year. Meanwhile, the end of 2008 saw significant drops in prices motorists are paying at the bowser.
It all adds up to billions more in consumers’ pockets, even before the government dips into the $26 billion in infrastructure funds at its disposal.
More stimulus to come
There is no doubt that the economy is slowing and uncertainty over job security is likely to play a part in this trend. However further stimulus packages and projected interest rate cuts will buffer Australian businesses throughout the year.
How we can help
Going forward, business will be more challenging and that’s where the Commonwealth Bank can help. Our dedicated business bankers are ready to help your business prepare for the slow-down, with expert advice and practical solutions that keep cash flowing.
To find out more, call your Relationship Manager or 13 1998 24 hours a day, 7 days a week.
