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.

ends

 

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

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

 

 

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.

A SHORT, SHARP global recession, driven by the coronavirus is a real risk according to the CEO of one of the world’s largest financial advisory organisations. He is urging investors "to take steps now to build and protect their wealth".

The warning from Nigel Green, the chief executive and founder of deVere Group, comes as confirmed cases rise and governments and central banks around the world are taking increasingly aggressive measures to try and combat the economic impact of the outbreak.

Among the steps being taken on Tuesday, the US Federal Reserve announced that it would slash interest rates by half a percentage point. Meanwhile, the Bank of England is drafting an action plan to deliver a “powerful and timely” response to the coronavirus outbreak, and Australia signals it may resort to Quantitative Easing.

“The outbreak is developing and evolving quickly and no-one accurately can predict what will be the economic fallout," Mr Green said.

“However, I believe that based on what we currently know, the risk of a coronavirus-driven short, sharp global recession this year is significantly growing. 

“The epidemic has already dented anaemic global economic growth this year and it can be expected to slow further, then contract, as the fear of the virus takes hold.”

“The outbreak has already sent the stock market into bouts of volatility not seen since the 2008 financial crisis, severely disrupted global supply chains, shuttered factories, grounded flights, closed attractions and cancelled major events. Entire powerhouse cities in Asia and Europe are nearly shut down.

"Multinational companies have warned that coronavirus will severely hit profits. Workers are being evacuated and forced to work from home and to avoid travelling," Mr Green said.

“We can see both supply and consumer demand are already being impacted in key sectors, such as travel and tourism, hospitality, manufacturing and retail, and it is going to extend to others.  

“This scenario is then likely to feed on itself: a lack of consumer confidence and spending, lack of business investment, more job cuts, which means even less spending and demand, which leads to further job cuts.

“Unfortunately, companies already on the edge are likely to fold as we have seen this week.

“Against this backdrop, we should prepare for a short-term but severe global recession," Mr Green said.

“However, the world economy is likely to bounce back strongly. We could even see revived global growth as economies rebuild and adapt; and especially so if central banks and governments step in to actively kick-start growth.

“The short-term economic impact of coronavirus is likely to affect capital markets, which in turn affects investor returns.  

“Coronavirus has shifted the landscape. Investors are urged to review their portfolios to ensure that they are still on track to create, build and generate wealth.”

The deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and its high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12 billion under advisement.

ends

By Leon Gettler >>

CENTRAL BANKS  around the world are cutting interest rates to deal with the coronavirus but it won’t help, Rabobank economist Michael Every has warned.

The coronavirus (Covid-19) and its impact is unprecedented and central banks don’t have a clue how to deal with it, according to Mr Every.

“The question I have to ask, and I think I know the answer myself as I am asking it, is: Are lower interest rates going to be a cure for a deadly virus? Are lower interest rates a cure for having your supply chain disrupted so you can’t get key components? Are lower interest rates a cure for everyone staying home and not buying anything? And the answer is no, no and no,” Mr Every told Talking Business.

“It’s a nonsense to believe central banks are going to get us out of this, were a worst case scenario to unfold in terms of this virus getting much uglier. If it were to get worse, I don’t see what the RBA for example is going to do about it. Or the Fed, Or the ECB. Or the Bank of Japan. Or the people at the Bank of China. 

“It can provide infinite liquidity to companies that are without a key component, without which they have no business. It can provide infinite liquidity to households that don’t want to spend it because they’re not going out.”

DOMINO EFFECT KNOCKS ON

Michael Every said the problems in China would create a domino effect in which companies around the world will not be able to get the components they need to produce the goods to sell to consumers.

He said it will be a demand shock and a supply shock. The impact is impossible to calculate but it is clear everyone will be swept up in it.

“Really at root here, what this crisis is underlining is how fantastically, how magnificently stupid globalisation was as an idea because you build an entire pyramid of just-in-time very complex supply chains centred on China, or in Australia’s case, providing input into a China-centric supply chain, and of course, the whole thing is massively fragile if anything goes wrong anywhere,” Mr Every said.

“We are constantly pricing for perfection, which is insanity when you consider in the long run, perfection doesn’t last that long.”

LIQUIDITY HOLDING PATTERN

Mr Every said banks can provide small businesses with more liquidity during the coronavirus crisis, but as with the global financial crisis, that puts everything in a holding pattern.

When business conditions return to normal in several months time, the small restaurants or factories will have a bigger debt load, and that will be a problem for the banks.

“We are heading for really uncertain territory on multiple fronts,” he said. “The RBA hasn’t managed to get inflation right, they can’t get employment right. What on earth makes them think they can sort out a virus as well?”

The bond markets are now forecasting a recession and Rabobank has pencilled a mild US recession this year, which will result in a technical global recession.

“That was pre-virus. If you throw the virus into the mix, it’s a no-brainer that you’re going to be looking at a recession,” Mr Every said.

“Everywhere you look, there are red light flashing suggesting this could be a very strong breeze which blows over what was a feeble upturn at the beginning of 2020, which pushes us into a genuine global recession.”

www.rabobank.com.au

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.

ends

By James Brett and Angus Dorney >>

THE CORPORATE WORLD is littered with buzzwords. From ‘agile omni-channel gamechangers’ to ‘disruptive synergies’. These words might have meant something once, but now they’re just empty syllables – the junk food of enterprise vocabulary.

But there’s one phrase fast approaching buzzword status —and we shouldn’t let it because it’s far too important: customer centricity.

Customer centricity is deceptively simple. It basically means genuinely caring about your customers and their needs. It denotes a belief that nurturing a customer will nurture your business. 

Importantly, it’s about more than just creating flashy experiences that look great but are ultimately shallow. True customer centricity is about providing solutions that solve real problems and improve your customer’s quality of life.  

When done well, it drives the kind of fierce customer loyalty and goodwill that can insulate an organisation from a thousand shocks and drive profits that others envy.

LARGE ENTERPRISES CHALLENGED

Despite its apparent simplicity, customer centricity is particularly difficult to achieve in large enterprises.

In many of these organisations, cultures, processes and legacy technologies designed with a transactional – or even exploitational – view of the customer have dominated.

In these cases, the problem is usually compounded by executive leadership – who drive and maintain the entirely wrong types of corporate culture. 

Consider the fallout from the recent Royal Commissions into Aged Care, Financial Services, and Disability. Many of the organisations delivering mea culpas now, delivered media releases in the past trumpeting their ‘customer-obsession’ and ‘customer-centricity’.  

At its core, customer centricity in an enterprise requires innovation. When your key considerations are shareholders and financial metrics, it’s impossible to innovate. This is because true transformation and customer-centricity are long-term strategies, they are an unwinding of bad habits and a nurturing of good ones.

This is particularly challenging for large organisations where it’s difficult to determine what to fix first and how to do it fast enough to keep pace with the rapidly changing needs of the customer and increasing competition. 

BADLY LEADERSHIP INCENTIVISED

So how have these institutions been able to last so long if serving the needs of their customers hasn’t been their core reason for being?

Historically, the reason enterprises have ignored the needs of the customer is because executive leadership has been incentivised to do so.

With their remuneration tied solely to financial metrics and, by extension, short-term financial goals, customer needs have been a distant second to investor returns.

Suncorp is a perfect case of the short-term aims of shareholders trumping the long-term strategy of improving the customer experience.

Former chief Michael Cameron, and Microsoft Australia’s one-time managing director Pip Marlow, wanted to make Suncorp more customer-centric and turn the bank into the ‘Amazon of Financial Services’.

Disgruntled investors killed the plan off when it didn’t immediately generate revenue and now Suncorp will return to its core business of banking and insurance.

DRIVING CUSTOMERS TO DISLOYALTY

We’re currently facing an age of customer disloyalty, and so we should be. What looks like ‘disloyalty’ to a business, is actually the customer searching for products and services that offer them real value.

There is now more choice than ever before and finding the alternatives has never been easier.

Despite this, most incumbents seem to think they’re too big to fail – if their lack of action on serious customer-centric innovation is any indication.

True innovation has to be tied to the needs and desires of the customer. It isn’t easy. Sometimes it involves turning your back on the historical sacred cows of your business – such as when Netflix jettisoned its mail order DVD business to pursue video streaming.  

Simply increasing the efficiency of existing business lines isn’t customer centric. Offshoring thousands of roles to Bangalore or the Philippines isn’t innovation. All it does is squeeze more revenue from an existing offering, so to call it anything other than ‘shareholder centric’ is a sham.

Business leaders need to bring their investors on board and champion an embrace of true customer-centricity – and they need to do it now.

Start-ups are already disrupting previously untouchable industries like financial services and insurance (FSI), telecommunications and energy.

They’re succeeding because, for them, customer-centricity is not just a buzzword.

 

About the authors

James Brett is a leading CTO, digital strategist and author, having led digital transformations for some of Australia's largest and best-known brands. Angus Dorney is co-CEO of digital product engineering firm, Kablamo, a team of Australian specialists who led the digital transformations of Australia's largest media organisations, and are now bringing that expertise to enterprise IT. 

Contact Us

 

PO Box 2144
MANSFIELD QLD 4122