Overview

Fitness industry taken away and cannot do take away

Barrie Elvish is the CEO of Fitness Australia, the industry organisation representing Australia's exercise professionals, and he is hot and bothered by how the pandemic shutdowns have devastated the industry. In his words, here is how the past 18 months has played out, he says, with unnecessary negative impact on the fitness sector and its client base.

By Barrie Elvish >>

UNLIKE MANY OTHER INDUSTRIES, such as hospitality and retail, who have been able to adapt to ‘take away only’ or online e-commerce sales, the Australian fitness sector, which has been closed for a minimum of 30 percent since March 23 last year, cannot. 

In Melbourne alone, to date more than 52 percent of all days have been lost due to lockdowns and this figure is set to rise further with uncertainty around the current lockdown timeframe. While in Sydney, despite only being into their second city-wide lockdown, 27 percent of days have already been lost. 

While many fitness businesses and operators have provided live-stream classes or online workouts, many of these services have been offered to members free of charge just to keep them engaged in their exercise habits. 

These essential community activities that help people maintain their mental and physical health and wellbeing have received no customer income despite still having to pay fixed costs such as rent, rates, equipment rental and other utilities. On top of these financial challenges, businesses are also focused on ensuring the wellbeing of their staff and trying to maintain genuine hope in an increasingly hopeless situation. 

In a stark reality check of the impact of COIVD on our sector, prior to the pandemic employment levels in the sports and physical recreation activities industry, which also takes in the health and fitness sector, substantially rose from 54,700 in 2000 to 117,800 in 2019. However, faced with lockdowns, business uncertainty and poor economic confidence this figure dropped by almost half in 2020 to 61,200.   

Unfortunately, unlike the hospitality sector, their small business fitness and exercise equivalents have not had the benefit of government support through finance support packages or the various participation voucher systems implemented by most states to support business recovery, when things do open.  

This double whammy is hard to comprehend when at the same time, the community is being reminded of the importance of daily exercise.  

With the lack of income and customer participation caused by the lockdowns, serious consideration needs to be given to the 'recovery' of our sector once cases drop, vaccinations increase and the two most populated states start opening up. 

State governments, and their Federal counterpart, need to activate a voucher initiative as a priority to help propel the industry. Indeed, for the target vaccination group of under 40s, such an incentive may be especially attractive.

A voucher incentive also has the potential for a legacy of participants not only starting an exercise regime but maintaining it; a legacy that does not apply to the hospitality sector except for perhaps the encouragement of more alcohol consumption. 

Exercise and physical activity, wherever it takes place and in whatever form, is essential for the maintenance of positive physical and mental wellbeing.  

Fortunately, we know the recognition of the importance of exercise is growing, as evidenced by our sector opening sooner from recent lockdowns, compared with last year. 

What governments at all levels need to think about, now more than ever, is the broader health and long-term wellbeing of the community by encouraging participation and access to a variety of safe exercise options.

www.fitness.org.au

 

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Is AMP the 'Kodak' of Australian finance?

OPINION By Scott Phillips >>

WHEN YOU ARE a guest on a radio or TV program, the general expectation is that you make some thoughtful and insightful comments to help distil the essence of an issue.

Hopefully I do that more often than not. But last night (March 25), I played second fiddle to my host.

I was on the Money News Show on 2GB, 3AW and 4BC, with Brooke Corte.

Brooke is as sharp and experienced as they come, and asked me about AMP’s latest ructions (more on that in a bit).

I was lamenting the fact that AMP was the pre-eminent name in financial services in Australia a few short decades ago, and -- with some better decisions -- should have been the biggest name in finance in Australia today.

I discussed the fact that they seem(ed) unable to innovate away from their old model of AMP advisers selling AMP products.

Brand-wise, I said, “They could have been the Goldman Sachs or JP Morgan of Australian finance."

And Brooke, quick as a flash, replied “Instead, they are the Kodak of Australian finance."

I wish I’d said that! 

It is the perfect analogy.

A company, at the top of its game in the then-current circumstances, which chose not to, or was not able to, notice the changing winds, and trim its sails accordingly.

Like the media companies that were caught flat-footed for a decade or more as disruptors stole away their classifieds ‘rivers of gold’, AMP kept plowing on with its existing model and way of doing business.

Don’t get me wrong -- change would have been scary, painful, culturally difficult, and the outcomes were far from certain.

But the net result of the last 20 years is a company whose share price has gone from almost $16.50 to $1.33, turning $10,000 into $812.

And if that's not bad enough, the ASX has doubled (and that’s before dividends), meaning you’d have given up $20,000 to have $812, instead.

Now, I’ve worked at some calcified companies before.

I don’t envy them the task of essentially having to destroy and rebuild the business.

But if they don’t, I think it’ll be sold for scrap.

Frankly, it might even be too late for that.

The once mighty AMP brand -- and its people, who were considered pillars of the community -- has been allowed to wither. It’s on its deathbed.

And yes, I have a tangential dog in this fight -- at least emotionally: my parents met, working for the AMP in Sydney!

(As an aside, those of us of a certain age might remember when our corporate institutions were so big and so omnipresent, they earned the prefix ‘The’. “The AMP” and “The BHP” are phrases you don’t hear any more, but it’s how we all referred to them, back in the day.)

So, then, to the most recent dramas.

For a company that really can’t afford them, AMP has had more than its share.

The latest was a report, yesterday, that its CEO Francesco De Ferrari, would be leaving the company.

The stories broke just before 3pm Sydney time.

An hour later, AMP asked the ASX to halt trading in its shares, “pending a further announcement” according to the ASX.

One plus one seemed to equal two. The CEO must be going, right?

After all, if he was staying, a quick denial and the shares needn’t be halted, right?

Three hours later, we got what might be the shortest announcement I’ve ever seen a company release:

“AMP Limited notes the media reports today and confirms that Francesco De Ferrari remains as chief executive officer of the group.”

Right.

We can only speculate what happened in those three hours.

Were I prone to such speculation, I would imagine a significant amount of time on the phone, and a few heated words.

But I’m not, so I won’t.

By the time you read this, all may be known.

But man, for a company that doesn’t need any more drama, AMP is not going quietly.

I’ve said for years that you couldn’t drag me, kicking and screaming, to buy AMP shares.

Maybe, eventually, they get it right.

And the AMP brand is worth something, even on its own.

But that value deteriorates with each passing day -- and each passing scandal.

At the very least, I hope Brooke’s ‘Kodak of finance’ has value as a salient lesson for managers and investors, alike.

Our modern world moves fast.

Innovations are coming at us at a rate previously unimaginable.

There probably was a time when AMP’s refusal to bow to the change around it actually stifled such change.

Such was its size, and gravitational pull, if the AMP wasn't up for it, chances are it mightn't have happened.

No longer.

The Canadian ice hockey player, Wayne Gretzky, famously explained his greatness thus: “I skate to where the puck is going to be, not where it has been.”

Seems obvious, right, sports fans?

And yet, so few companies do that, well.

Kodak whiffed it.

So did AMP.

Will its future be different? I don’t know, but I’m not sure we’ve yet seen concrete evidence.

Compare that to (a company whose shares I own,) Amazon.

Confronted with the nascent eBook revolution, Amazon could have circled the wagons. It could have protected its physical book business with every last dollar.

Instead, then-CEO Jeff Bezos sent the company’s Kindle eBook team to the other side of the country.

Why?

Because he didn’t want the corporate imperative to protect the existing business getting in the way of Kindle’s success.

Bezos was determined to let the customer decide, and to be the best in both markets.

Incumbency, as Kodak, AMP and others have found, is an enormously profitable advantage for a long time.

Until it’s not.

And then, it can be a terrible millstone around a company’s neck.

It’s not a death sentence, but you have to be able to accept and respond... not to the way you wish things were, but to the way they actually are.

The problem for investors is that it can be very hard to give up hope when you own those incumbents.

“But the brand is so strong”

“But I’ve made so much money thus far”

“I’m sure it’ll bounce back”

“Just look at those profit margins”

All true. 

But if the circumstances that led to those outcomes are changing… 

For mine, investors should always apply what I’ll call the ‘Gretzky Test’ (I’m sure someone else has already used the term, but work with me, here).

Do yourself a favour:

Open your brokerage account and look at your portfolio.

Then ask yourself: Relative to its industry, what mark would I give each company, out of 10, for evidence that it is skating to where the puck is going to be.

If you’re handing out 9s and 10s, I’d suggest you be a little stricter -- very few companies are that good, even if they want to be.

And if you have 2s, 3s or 4s, you might want to reconsider their positions in your portfolio.

I reckon, for most established companies, a 7 or 8 is about right.

Too close to the ‘bleeding edge’ and you risk them being distracted and wasting money on any folly that comes along.

A 5 or 6 might be a pass mark, just, but you’re really saying ‘these guys are kinda paying lip service, but don’t seem too agile'. Watch these ones closely.

Here are a few established companies I reckon are 7s and 8s:

RPM Global (ASX:RUL) is a mining software company making the transition from one-off licence sales to software-as-a-service.

Homewares retailer Adairs (ASX:ADH) -- yes, really -- is embracing ecommerce at a pace that belies its old-school product category

And Domino’s (ASX:DMP), once mocked for describing itself as a technology company, has put ceaseless innovation at the heart of its growth strategy.

So, regardless of whether the CEO stays or goes, today might be a good day to ask yourself: 

“How many ‘AMPs’ do I have in my portfolio? And what am I going to do ab out them?”

 

 

Scott Phillips is the chief investment officer for Motley Fool Australia. He also runs the Motley Fool Share Advisor, which he describes as "our (market-beating) flagship investment service". 

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Imperatives for business events getting back into business

By Geoff Donaghy, ICC Sydney CEO >>

IT'S BEEN ALMOST 12 months since COVID-19 hit Australia and abruptly shut down the business events industry. Events including conventions, symposiums, association meetings and trade exhibitions all disappeared overnight. 

The financial impact of the pandemic on Australia’s economic health has been well and truly documented. Specifically looking at our industry, the Business Council of Australia (BECA) reported a loss of $A35 billion in direct expenditure to the Australian economy and over 230,000 jobs being impacted as a result of the pandemic.

However, this is just the tip of the iceberg. There are other impacts not so easily quantified, but with enormous ramifications that will continue to have a lasting effect long after the pandemic has retreated.

As I reflect one year on, one such ramification that hasn’t been widely acknowledged is the long term impact on Australia’s knowledge economy which is silently suffering.

BUSINESS EVENTS DRIVE INNOVATION 

Business events deliver much more than travel and hospitality spend, as significant as that is. They are a driving force for innovation, providing researchers and practitioners with a platform to discuss and disseminate new ideas. They are where the brightest minds come together to solve the world’s problems – from health and medical breakthroughs, technology and ethics, engineering and development, to environmental sustainability and more.

Meeting in person allows for networking opportunities, business exchanges, recruitment efforts and introductions. Some of the greatest business ideas, scientific developments and technical innovations have been sparked during an event workshop or in the corridors outside of formal sessions.

Connections are made and actions are taken, which otherwise may never have taken place. For example, The University of New South Wales (UNSW) was awarded a $A17.7 million grant from the National Health and Medical Research Council to support research into HIV AIDS as a direct result of the World Aids Conference held in Sydney. They also received an $A18 million grant from the Bill and Melinda Gates Foundation to support a research study into HIV drug therapy while being recognised as an international leader in HIV AIDS research.

Hosting virtual and hybrid events in the current climate has certainly been valuable for businesses and organisations to continue to communicate in a pandemic environment however, there are some things that we need to do together face-to-face that you can’t easily replicate online.

As the pandemic endures, it’s never been more important for private industry, government and the community to recognise the broader value of business events to our society, beyond the obvious monetary outcomes. It may be difficult to quantify the non-monetary benefits but it’s crucial that they are ultimately recognised and outcomes are captured.

VIRTUOUS CIRCLE

Along with the reactivation of the visitor economy, the knowledge economy forms part of the advocacy platform for the business events industry.

It is yet another reason why we need to bring the return of face-to-face events into the foreground and make this our primary focus in 2021.

We have reached a major milestone with the beginning of the vaccination roll out in Australia but realistically, the business events industry remains in survival and immediate recovery mode.

In order for business events to reach their full potential, we need to reach a unified approach to interstate border closures, agree on a national definition for hot spots and ultimately open our international borders so that international travel can resume.

Longer term, once we have achieved effective global vaccination, only then will people be able to move freely to attend international events with confidence, putting the industry in a position to fully recover and once again deliver intellectual, business and social legacies for Australia.

www.iccsydney.com

ends

 

Directors warn: the second wave economic disaster is a ticking rental time bomb

By group director Tim Newman-Morris and the directors of LPI Group >>

THE COVID-19 rental legislation appears to be a ticking economic time bomb for any small business that rents a tenancy and is currently closed or has had their sales massively impacted.

The legislation requires 50 percent of rent to be deferred and repaid later. What appeared reasonable in March has become a growing burden likely to bankrupt many small businesses. 

Lollipop’s Playland and Cafe Bentleigh East is one such small business with a ticking rental time bomb attached. The business which has been successfully established for over 20 years is accruing rental costs of close to $9000 a month and will likely owe the landlord $80,000 in deferred rent by the time they re- open. 

Add to that, the cost of minimum utilities, phone and insurance (that requires continual payment) and the costs continue to mount. The government grants available are but a drop in the ocean compared with the growing debts.

If you extrapolate the data to just this small franchise group, Lollipop’s Playlands (with 12 sites in Victoria and 27 in Australia), the figure becomes closer to three quarters of a million dollars for Victoria alone. Apply that amount to all the small businesses now in the extended lockdown and the numbers are staggering.

Although the rental legislation may appear to be fair, i.e. the landlords and the tenant are sharing the rent 50/50, this is not the case.

As a small business that was forced to close, LPI Group has received zero income yet must continue to bear the cost of 50 percent of the rent on a building unable to be used. If the small business has no guarantee of income why then should the landlord?

The other point to consider is most small businesses are just that: small and trying to build equity.

Most commercial landlords already have a large equity position which allowed them the capacity to become landlords in the first place. As such, the landlords are in a better position to receive no income than the small business owners.

The end result of this legislative inequity will be a devastating economic impact that will be felt for years to come. Further exacerbating the situation is a government under so much pressure they don’t see it coming.

The only way to defuse this hidden economic bomb is legislation that shares the pain equally across the nation. Particularly in Victoria where businesses are experiencing an extended lockdown.

In short, the landlord should receive no deferred rent while the small business owners receive no income.

This should also be extended through to banks receiving no interest during this period, not just capitalising it to be repaid later so that all share the burden equally.

 

LPI Group is the business behind the Lollipop's, Kanga's, SteriCoat, TuttiFrutti Frozen Yoghurt, Code Red and Crazy Climb.

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Builders call for 'constructive' Federal Budget

MASTER BUILDERS Australia has released its Pre-Budget Submission, including a plan for Rebuilding Australia with a program of fiscal and policy measures to boost economic growth.

“Our message is to the Government is clear. Talk of supporting small businesses through the crisis and creating jobs will be for nothing if there is not a pipeline of work,” Master Builders Australia CEO Denita Wawn said. 

“As the Reserve Bank Governor told the Parliament last week, “fiscal spending will get people back to work” and the government should heed our call to implement stimulus measures that will supplement demand, including the establishment of a CommunityBuilder grants scheme and a 12 month extension of HomeBuilder,” she said.  

“If the government is any doubt, the bloodbath facing our industry is confirmed by Master Builders latest forecasts pointing to a 27 percent fall in homebuilding activity compared to last year and a more than 17 percent slump in commercial construction sector.

“Cranes in the sky and utes on building sites are cited by some as indicators of economic growth. You won’t see too many of either unless the government steps in and adopts measures such as those called for by Master Builders,” Ms Wawn said.

"A strong building and construction industry is essential to a strong economy and vice versa. That is why fiscal and policy measures that activate private capital, encourage business to invest, and help fill the demand gap are vital not to economic recovery.

"In the Australian economy there is no industry with a bigger economic multiplier effect than building and construction. There is also no larger provider of full-time jobs and there is no other industry with as many small businesses, that is why we are seeking stimulus measures across the entirety of the residential, commercial, and civil construction sectors."

Ms Wawn said Master Builders wanted to see the Federal Government deliver measures that will line up with Master Builders Australia Top 5 Budget Priorities:

  1. Rebuild Australia through investment in building and construction that give back to the economy.
  2. Rebuild Australia by supporting business performance.
  3. Rebuild Australia by supporting people in the building and construction industry workforce.
  4. Rebuild Australia by improving procurement, planning and regulation.
  5. Rebuild Australia by appointing a Minister for Housing and Construction. 

Ms Wawn said underpinning the Top 5 are proposed fiscal and policy measures targeted to kickstart building and construction activity including: A 12 month extension of HomeBuilder; establish a CommunityBuilder grants scheme based on the highly effective HomeBuilder model to activate the construction of smaller community/not-for-profit facilities; significantly reduce depreciation rates of capital works for investors in both residential and commercial property; facilitate through new procurement models an increase institutional investment in social infrastructure including social housing and ensure that smaller and local businesses can tender to deliver government funded projects.

www.masterbuilders.com.au

ends

Chop chop: hurry up and turn job cuts around

By John Sheridan >>

BIG BUSINESS employs people. Small business employs people. Government employs people. And scale-ups employ people.

However, you may have noticed that large organisations have been very good at getting rid of their workforce, replacing them with software over the last few years. 

Banks, telcos, insurance companies, transport companies, universities and miners are all becoming more efficient (fewer staff), and steadily making thousands of people redundant to be replaced with software.

Now COVID 19 has exacerbated that problem even further.

Small businesses have no choice. It’s efficiency or shut the doors.  

Government employs huge numbers of people (thank goodness) across health, education, defence and the civil service. Keeping a lot of people in work. 

Training itself is an industry that employs a lot of people. Even employment agencies employ a lot of people. (I always wonder what they really do).

But scale-ups are where the job opportunities for the future exist. Providing a fertile environment for new jobs.

Jobs working for scale-ups in agribusiness, creative industries, defence, ICT, manufacturing, medical, METS, robotics, smart trades and tourism.

JobTrainer is a good idea. But people have to be trained for the jobs of the future not the past.

JobTrainer for what? That is the dilemma. 

For when 10 times more people are looking for jobs than actually exist, there is a problem. And that is not going to change quickly, just because we manage COVID-19. 

Because another 'virus', the 'digital disruption virus' may not kill people, but it is ultimately just as disruptive to jobs and the economy.

The jobs 'elephant in the room' has to be addressed. There are not enough jobs. And the number of jobs diminishes every day. 

JOB LOT OF MUSICAL CHAIRS

Society has accepted a bizarre game of 'musical chairs' ... with chairs disappearing steadily as time passes by.

But this is not a game. It has real consequences. Pain. Depression. Loss of meaning. Frustration. Fear of the future.

There is no point putting money and effort into training unless there is equal investment in job creation at the same time. Not just for now, but for the evolving job environment of the future, which we know about and understand.

The replacement of jobs by software has been going on for years. The coronavirus has just brought this technological disruption into greater focus.

Both disruptions create uncertainty. With its impacts.

For until there is certainty - all people (including business owners, CEOs and boards) will be conservative in their actions, investments, commitments and plans. Including hiring and employment.

So where are all the high paying jobs that we need going to come from?

They will come from our productive industries and the many scaleups in those industries.

SCALE-UPS CREATE REAL JOBS

For those who are unfamiliar with the term, scale-ups are companies, usually over three years old, that are growing – 'growth companies' with a repeatable and scalable business model.

About 50 percent of new jobs come from scale-ups. And in Australia, we know who they are and where they are. Which is a real opportunity. They are stable, and most have the capacity to grow and employ. 

They can make jobs (Jobmaker). Scale-ups are Jobmakers. And they will define what training is going to be useful (JobTrainer).

The Scale-Up Report on UK Economic Growth illustrates this point clearly: “Competitive advantage doesn’t go to the nations that focus on creating companies (start-ups). It goes to the nations that focus on scaling companies”.

There is evidence that shows scale-up companies help create high-quality jobs, which are exactly the jobs we need to support if we want a sustainable and 'fair-go' country to live in. 

And high quality jobs are high reward jobs, which are the precisely the jobs that the unions, state and federal governments are speaking about.

Scale-ups can provide jobs now and pathways to employment for students in high schools and universities for the future.

Scale-ups come from all sectors and regions, not just ICT.

Scale-ups are disproportionately innovative and the innovation appears to cause growth

Innovative companies grow twice as fast (in employment and sales)

Scaleups affect the surrounding business environment – a 5 percent rise in employment from high growth firms leads to a 1 percent increase in the surrounding region

WHERE ARE OUR SCALE-UPS?

We have scale-ups in all our productive industries - agriculture, creative industries, defence, education, ICT, manufacturing, medical and health, METS, robotics, smart trades and tourism.

So increasing productivity in our productive industry scale-ups offers the biggest economic benefit right now. Investing in productive industries is even better.

We have generated deep knowledge from the mining industry, which can be applied elsewhere – water, pollution control, safety, waste management, space, recycling, robotics, off road vehicle automation, defence, energy, remote control systems, AI and drones.

Much of this knowledge is valuable in countries facing similar issues to us. Especially issues with energy, water, pollution, environment, safety and remote control systems (= Export).

And we can apply that same intellectual horsepower to other industries – assistive technology, disability services, aged care, energy, waste management, soil health, aquaculture, housing, preventative medicine, manufacturing, sport and recreation (= More Export).

COVID 19 will impact our economy for years.

Digital disruption will impact our economy for decades.

Both disruptions have to be managed strategically.

Increasingly, businesses need only a small number of well-paid specialists  – innovators, strategists and senior management – responsible for core business and competitive edge. 

And nearly everybody else can be replaced by software, or outsourced. Which is the point so many ‘economists' miss. Software replaces, not displaces. 

LET'S PUSH BACK, AUSTRALIA

We can push back and must push back. We are a rich country with many resources and in response to this challenge we should focus on building our productive industries by supporting scaleups in agriculture, creative industry, defence, education, ICT, medical and health, manufacturing, mining services, robotics, smart trades and tourism. 

We can’t be passive in this event. JobSeeker and Jobkeeper have bought us a short period of time. To think. To plan. To focus.

We have created many 'hot spots' of innovation in our productive industries where we lead the world.  We have established scale-ups that can grow and provide jobs. Jobtrainer should be focused on these industries.

We have to leverage our scale-ups.

The RED Toolbox – https://theredtoolbox.org – is a collaboration platform for Australian productive industry ... scale-ups. 

The ED Toolbox – https://www.edtoolbox.com.au – is a sister platform for high schools to help students better plan future study and work options.

One platform leads to another. Because we don’t have to just connect industries and regions, we also need to connect generations. And expedite collaboration within silos, between silos, within states and between states and regions. Joining the brains. 

ED Toolbox is about considering possibilities. RED Toolbox is about connecting and collaborating Australia’s intellectual resources to realise potential – innovation, sustainability, investment, export and future of work and jobs.

Jobkeeper. JobSeeker. JobTrainer. Jobscaler.

Used together and with vision and direction, and with a focus on our thousands of scale-ups … they could just be our way out of this mess.

 

About the author 

John Sheridan is CEO of Digital Business insights (DBi), an organisation based in Brisbane, Australia, which focuses on helping businesses and communities adapt to, and flourish in, the new digital world. He is the author of Connecting the Dots and getting more out of the digital revolution. Digital Business insights has been researching and analysing the digital revolution for more than 15 years and has surveyed more than 50,000 businesses, conducting in-depth case study analysis on more than 350 organisations and digital entrepreneurs. Now DBi is turning that research into action through a series of digital business development platforms, the first of which launched in 2016, the Manufacturing Toolbox. DBi has also launched a series of international online trade showcases, promoting Australian goods and services to specific countries and promoting use of those showcases in those countries. Australia's Regional Economic Development (RED) Toolbox was launched two years ago. The latest in the toolbox series is the ED Toolbox, which helps high school students, parents and educators navigate the future of work and jobs.

www.theredtoolbox.org

www.edtoolbox.com.au

http://www.db-insights.com/

ends

 

 

How long will the recession last? IFM economist measures it up

By Leon Gettler >>

IFM Investors chief economist Alex Joiner has no idea how long the forthcoming recession will last.

Bloomberg Economics, S&P Global and ANZ have tipped that the coronavirus pandemic will push Australia into recession.

Joiner says economists are now working through how long it will last.

“We don’t know because what we’re seeing is the unfolding of the coronavirus in advanced economies,” Mr Joiner told Talking Business. 

“We’ve seen China trying to limit the spread of the disease. Probably their numbers are a little generous in terms (of them) putting some numbers out to suggest they have it under control, I’m not sure that’s the case, but what we’re looking at is places like Italy and South Korea and these sorts of places where the number of people infected is continuing to rise.

"What we’re seeing in those economies is the government increasingly putting restrictions on the way people can behave and therefore they are not taking part in the activity with the economy.

“So we haven’t seen the peaks in the numbers of infections in advance economies so no-one is game to call an end to the spread of the disease so obviously economies are going to be in this downturn while the spread of the disease keep going.”

AUSTRALIAN ECONOMY WEAK

He said Australia’s latest growth figures showed the economy was weak.

He said the national accounts showed growth at 2.2 percent, but scratching beneath those figures showed the economy was struggling.

“What notable to me and other economists is how weak the private sector is,” Mr Joiner said.

“We’re seeing no growth from the private sector at all. Business investment is particularly weak.”

He said one of the key contributors to growth in the last quarter was residential stamp duty as the property market recovered. It added 0.16 percent to the 0.5 percent growth rate recorded for the last quarter.

SMALL BUSINESS IN CRISIS

Another point that was notable were the figures for the income of the small business sector.

That measure has been going backwards for six consecutive quarters which meant the small business sector was in a poor state entering the coronavirus period.

“It was a low quality outcome for the Australian economy,” Mr Joiner said.

He said Treasury and Reserve Bank of Australia had looked at the impact of fewer tourists and students coming to Australia.

“What they haven’t looked at is the changed behaviour of businesses and consumers,” Mr Joiner said.

“Obviously businesses are in phases where they are very cautious and they’re winding back investment and they’re probably looking at their payroll. And then the consumer is obviously very cautious.

“We’ve seen some changed behaviours in supermarkets and the consumer is going to be much less inclined to go out and spend in the shops.

“Then you’ve got the additional burden on the economy of things being shut down and cancelled so there is a behaviour of people being very risk averse and not doing what they otherwise normally would do and that will also impact on the economy.”

WHAT WILL RBA DO NEXT?

With the RBA cutting  rates again to 0.25 percent, the market focus is now on what the RBA’s quantitative easing will look like.

He said additional measures from the RBA included ensuring the free flow of credit to businesses.

“We don’t want to see a situation where the Reserve Bank has low interest rates but the banks won’t be lending any money,” Mr Joiner said.

“The Reserve Bank needs to ensure there is a free flow of credit into the economy if we want to see businesses continue to behave in a way we would like them to through this challenging time,” he said. 

www.ifminvestors.com

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.

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