30/09/2016 - 12:22

Lacking the confidence to lead

30/09/2016 - 12:22


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A lack of political direction and inertia across much of the economy are an unhealthy combination.

Lacking the confidence to lead
STALLED: Beset by internal challenges, Malcolm Turnbull has come up short in terms of providing economic direction. Photo: Attila Csaszar

A lack of political direction and inertia across much of the economy are an unhealthy combination.

I talk to a lot of business people in my day job, particularly during reporting season, which provides a unique opportunity to catch up with the chief executives of some of our biggest public companies.

It’s also a chance to get a measure of business confidence, and this year I asked every CEO I spoke to for their take on consumer sentiment.

It’s a slightly different question to ‘how’s the economy travelling?’ because it goes to how people are feeling, rather than what the statistics are telling them about business conditions.

The response I got from all these leaders was similar, bar one, and that was the irrepressible and pathologically optimistic Gerry Harvey.

But if I had to capture the flavour of all their responses in a word it would be ‘cautious’.

The balance of economic power has swung back to the east coast, and while national operators grapple with the challenges of this new two-speed economy, there are concerns that spending is slowing.

I also spoke to two very different small business owners last week and was struck by the similarities in their stories, despite operating in very different sectors.

One of them runs a design business and works closely with residential, commercial and retail developers.

The projects she works on are in planning for many years, and in some ways her business is an interesting bellwether for the economy.

She watches the retail trade figures closely, along with the broader economic indicators such as employment and interest rates.

Her business is growing at a steady rate but in the past few months she noticed something interesting – the same amount of work was coming through the door, contracts were getting negotiated and finalised, but then three big projects were put on hold.

Something had shifted and these developers just wanted to wait a few months before giving contractors the green light.

The other small business operator I spoke to was in retail.

Tony works in a tough corner of the sector that has been monstered by the growth of national chains and their buying power.

To survive, he’s fashioned his business into a convenience outlet; it leverages the store’s inner-city location so it’s no longer going head to head with the major chains.

Service is the key difference and that personal touch means Tony gets to talk to his customers a lot more and hear about their personal circumstances.

He’s blunt in his assessment of the economy.

“I reckon there’s an on-the-street recession,” he said.

Exactly what’s putting the brakes on spending isn’t clear to Tony, but he said shoppers seemed genuinely worried about how global issues like the US election and Brexit were going to wash through the Australian economy.

And then there’s the ongoing instability of Australian politics.

It’s hard to believe that after the carnage and self-destruction of the Rudd-Gillard-Rudd years we’ve ended up with something unnervingly similar with a conservative government.

The problem with anxiety of this kind is that it’s the enemy of action.

When individuals feel worried, they defer major investments.

Retail is still the second biggest employer in Australia behind health services and it also powers a lot of development, both retail and mixed-use commercial projects.

The on-street recession Tony was talking about might turn out to be a flash in the pan, a dip in confidence over winter that spring sunshine will melt away.

We’ll know soon enough. Retail sales figures have been weak for the past two months, just scraping into positive territory at 0.3 per cent for June and July.

Importantly, both these results have undershot expectations, suggesting analysts are not getting an accurate read of the tea leaves.

I think politics – both state and federal – is having a major influence on confidence in Australia at the moment.

Amid the debates over section 18C and marriage equality, I haven’t heard a lot from our prime minister about the economy and what’s going to drive it into the future.

Big business, especially the banks, are under pressure to clean up their cultures; and while I think a royal commission into the banks is probably a good idea, the cat calling around this push doesn’t do anything to bolster confidence.

Shoppers and Tony’s customers are looking for someone to explain how Australia and its economy are going to grow despite issues in the US and Europe. If government can’t deliver this explanation, then it’s up to business.


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