Small businesses in some parts of Australia, primarily in Western Australia and Queensland and in the mining industry, are achieving considerable growth whilst the rest of the country struggles and in some areas businesses are going backwards financially. This is the effect of the “two speed economy”.
The Reserve Bank has kept the official cash rate the same at 4.25% which means there has been no variation in the last three months whilst many small business operators argue that consumer confidence is very low and the economy needs assistance by the lowering of interest rates.
Some economists are forecasting a “two phase economy” to emerge during 2012. There is a belief that struggling areas of Australia are already in the first phase (tough going) and that this will last another three to six months. Around September 2012, there are hopeful projections that there will be a considerable uplift in economic activity (the improved phase). The problem for many small businesses is survival in the meantime.
There is some expectation that the Reserve Bank will lower interest rates in May or June after they consider the latest inflation data. If the economy does go into the so called “second phase” there is a real possibility that interest rates will start to rise again as economic activity increases. It is obviously a very difficult period for business operators. Cashflow is tight and banks are difficult to deal with.
Cashflow management remains probably the biggest single challenge for small businesses, particularly the management of debtors and stock. If you have concerns about any aspect of your business operations please contact us.
Many of our clients are experiencing slower payment from their accounts receivable as a general trend in business conditions.
