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Spare a thought for business owners

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by Peter Switzer

Political scientists might love the shenanigans going on in Canberra with all the thrills and spills of a minority government, conservative independents supporting Labor and the Greening of the parliament but spare a thought for business owners.

One CEO last week told me that there’s a lot of head scratching going on overseas, which started when the nation’s Prime Minister was disposed of with the military precision of the mafia. The pondering would have deepened when Kevin Rudd turned up as our chief spokesman at the UN this week.

The business boss in question made the point that thankfully our economic numbers buoy up confidence in us overseas but the leadership strength we have become well-known for looks like a thing of the past.

The Shepparton speech

At home uncertainty prevails at many levels for various businesses and this was not made any less worrying with Reserve Bank Governor, Glenn Stevens using his Shepparton speech to stir up the hornet’s nest, which is the media when it gets a sniff of an ‘interest rates to rise’ story.

This unnerving news for business, consumers and home loan borrowers was made worse by the Reserve Bank’s latest minutes and then a rogue bank economist who let loose with predictions of a 125 basis points interest rate rise by next year.

This won’t help businesses borrow and consumers to contemplate opening the purse strings for the all-important festive period for retail.

Policy paralysis

Also last week a private equity player told me there are numerous deals that cannot get off the ground because of the unhealthy condition of Canberra, which looks set to produce policy paralysis.

And while much of this was created by us voters at the election, all up it’s set to undermine business confidence and at least one decision by Prime Minister Gillard’s ministry selection team has made things worse.

The private equity guy is not alone in wondering why someone as competent as Chris Bowen would be moved out of the job for overseeing reform of superannuation and financial planning.

This is not a shot at his replacement Bill Shorten but surely the new guy will have to get across a complicated brief and try to see the legislative changes through a parliament, which will have too many potential critics, grandstanders and stonewallers.

Because of this confusion, one deal I have come across which relied on knowing what the Government’s changes for financial planning will be has meant that the parties in question don’t know how to value a dealer group or a financial planning practice.

This deal was held up for the election outcome and now it’s on hold until Shorten prepares legislation and then gets it passed.

Reality check

What we are looking at here is reality check 101 and if the independents as well as all of the politicians in Canberra don’t get this, business uncertainty will heighten and investment won’t follow.

The last NAB reading of business confidence was up but it was the first time in six months that business had turned positive about the future.

The signs are not overwhelmingly bullish at the moment and talk of 125 basis point rate rises looks and sounds crazy.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Thursday, September 30, 2010