What’s up?

Last week’s blog produced an all time high response from SmartCompany readers. It highlights the conundrum of all forecasting systems, posed thousands of years ago by Heraclites – the only constant is change itself.

Thanks for the feedback and the chance to consider the relative hiatus that is emerging between the businesses that are now going back to hiring full-time staff for long-term growth, and those that are still relying on casuals and part-timers to wait until there are real signs of recovery.

SPSSPS wrote: A couple of weeks ago you were saying “Regrettably, we are now likely to be heading down the next double black diamond run of a W recovery rather than the super-optimistic picture painted by the volatility promoting, bonus hunting stock brokers peddling optimism. While there has been a V-shaped recovery to date, all the signs suggest that it’s not over folks”. Now you’re saying “The public is starting to believe that the after shocks of the GFC are over and we can invest in the next round of speculative investments, despite Glenn Stevens efforts to jump all over these expectations.” Which of these polar opposite positions is the correct one?

Leo Chlds responded: I don’t think the two statements are polar opposites – the most recent statement is about public perception. I think part of the message here is that there are conflicting statements and the response by many to this apparent contradiction is to either freeze like a deer in the headlights, or get angry at the apparent contradiction – neither of which is particularly constructive to survival. Another part of the message perhaps is that just as many businesses fail when there’s an upturn as when there’s a downturn and even more fail when there’s an upturn after a downturn. The key is planning and getting your duckies in a row before the growth hits and rolls you over.

All sides of this discussion are right on the money as both the stock markets and consumers are in a push-me/pull-you stand off that is keeping investment on a stable course to nowhere. Big business (as indicated by Tony and Joe) is doing so well that it can be slugged to give households a six month $75,000 sabbatical within an economy propped up by an overheated China. At the same time, SMEs have been holding on to their staff by cutting back hours, holding back on bonus payments and reducing inventory levels while they wait for the promised recovery.

An examination of changes in levels of employment, unemployment and under-employment, which is taken by The Futurist as the equivalent of checking the teeth in the horse’s mouth, shows the contradictory nature of these indicators at this time.

Although there is much talk at the moment of a recovery in the Australian economy, Roy Morgan’s employment estimates show that the broad economy is yet to recover and rising unemployment indicates that businesses are still doing more “letting go” of employees than hiring of new ones.

Bill Evans, commenting on the flattening trend of the Westpac Consumer Confidence graph suggests the strong employment figures over recent months are likely to have helped keep consumer confidence high, as has the continued strength of the Australian dollar which is making imported goods cheaper.

At the same time, Bill warns that households have a lot more debt than in 2003, and he expects that will make consumer confidence more sensitive to future interest rate increases. “Households are holding significantly more debt than during that last period. Debt to income ratios are around 20% higher today than they were in 2003. And that may make them more sensitive to rises this time around.”

Gary Morgan’s consumer poll shows a similar levelling off of the economic recovery with Gary warning: “The overall employment level figures should also provide caution for policymakers. In February, 10,548,000 (down 276,000 — this is the largest monthly drop in employment since September 2007) Australians were employed — the lowest number since October 2009 (10,385,000). This includes 7,238,000 (down 254,000) Australians employed full-time and 3,310,000 (down 22,000) employed part-time.

With the consumer confused and the economists still searching for somebody else to blame for the global financial crisis, smart companies will continue to focus on business plans that assume a slow recovery and customers who are seeking higher quality and lower prices.

Now is the time to survey consumer’s emerging expectations, look for innovation and ways to enhance productivity in order to be best placed when these contradictory forces confirm what’s going up and what’s not giving a path towards sustainable growth.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking sonsultant at Marshall Place Associates which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship.

Email dr.colinbenjamin@marshallplace.com.au
Contact: CEO Dr Jane Shelton, Phone +61 3 9640 0099