Readers Respond on State of the Australian Economy Part 2

Australia
Reddit

Let’s move on to a few more of your thoughts on the state of the Australian economy

All our budgeting has been re done, and lowered to ensure we can manage an anticipated downturn in Mortgage lending.

No capital items are being purchased, and what can be done without, will be.

Marketing has been stepped up.

***

Adelaide businesses that my friends run they say are struggling. Including retail, hairdresser and prominent cafe. Rents are rising, wages are high and revenues are down.

***

This next response would be funny if it weren’t so sadly accurate for what’s happening in the land of the small business person. That is, red tape forces down incomes and increases welfare dependence.

Corporates are great at avoiding taxes on profits – including the GST component.

Entire industries are restructuring to avoid the payroll taxes (including the GST component), mostly by swapping employees for “independent contractors”. There is a loophole that makes this legal – which the larger organisations are using. The rest don’t get it right and end up being exterminated by prosecution and back-taxes. With independent contractors, the payroll component of GST is pushed onto the worker, who doesn’t then have to pay superannuation guarantee and the total business payroll is kept below the level of State payroll taxes.

The rest of us tried increasing prices to compensate for the taxes – but revenues didn’t go up. We’re a service business relying on household discretionary income – as this goes down, so does our revenue. So we cope by reducing the number of work hours available. To keep abreast of taxes we’ve had to reduce work hours available by over 30% since the GST and superannuation tax were introduced. Thank goodness debt is so cheap now – most businesses are up to their eyeballs in it trying to pay the taxes.

So now the business owner has a lower income – and is eligible for more family tax assistance. The employees have lower incomes – and are also eligible for more family tax assistance; or lose their jobs and become eligible for unemployment benefits. The funds we could be using to invest and grow the business are all going to the ATO as GST and profit tax.

***

We are finding the Sydney market very strong due to the Property boom driving renovating and refurbishing.

Melbourne is also doing well but the other states are only average

***

Up until last week we hadn’t had a decent job for about 12 months.

Now, all of a sudden, work is flowing in and threatening to swamp us.  While the optimist would delight in this recent flood of work, I’m naturally sceptical.  The potential now is that these new jobs will cause a sudden cash flow crisis that might result in client defaults.

Because of this, we’re quietly optimistic about the future, providing we don’t fall victim to a major business collapse.

***

I run a small business in the building industry, selling all building materials, timber, sheeting, decking etc to mostly domestic builders.

Business has slowed this past 6 months and not only that, we are finding more builders are going bust on us, because their clients , the home owner, cannot afford to pay them for the jobs.

The only way the economy is going, is down.

Greg Canavan+,
for The Daily Reckoning Australia

Join The Daily Reckoning on Google+

Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.
Reddit

Leave a Reply

4 Comments on "Readers Respond on State of the Australian Economy Part 2"

Notify of
avatar
Sort by:   newest | oldest | most voted
slewie the pi-rat
Guest
this is great! people are getting more self-sufficient, and staring to hope for the best and PLAN for even MORE fun! besides, it’s DEflationary [my professional OPINION], and, in slewienomics, that is both GOOD and MANAGEABLE! so there! we DO have the best banksters and this we pay them such big bucks and let them run EVERYTHING: b/c they CAN’T screw this up, again! L0L!!! —————————————— slewie’s ‘FLATION Report ~for US Monday and the Mighty US Dollar, too!>>> i saw a Reuters headline: Gold Loses $1200 on Stronger Dollar, or something… let’s take a look. the Commodities have been “on… Read more »
slewie the pi-rat
Guest

sheesh! i almost forgot!

yes! we have NO correlation bananas, today!
ole`!

slewie the pi-rat
Guest

that really is correlation.
Dollar UP, Commodities DOWN.
so:
yes! we DO have correlation bananas, today!

we can also have deflation without correlation, if the Dollar goes up, maybe even a little, and the Bloomie stands pat, or maybe goes up LESS than the Dollar.

we’ve seen this, already, and also this and that permutation.

i know! it’s little complicated, at first.
but pay attention;
there might be a quiz!

night-night!

Rose
Guest

Why don’t we exempt small businesses with less than 5 employees from the taxes to reverse the employment decline?

wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au