As a business owner, you need to ask: how is the Australian economy right now? Of course, recent events have made that an interesting question to answer. Over the past year or so, we've watched current events unfold that could (and have) completely change the course of the global economy, let alone Australia's.
From global political instability to financial legislation at home, economists have had a close eye on how markets are affecting the country and in turn, how Australia's economy can hurt your business.
Today, we take a look at a snapshot of the 2017 Australian economy and explain how it could affect your business.
— RBA (@RBAInfo) June 7, 2017
The Reserve Bank of Australia (RBA) has reported that inflation has risen 2.1 per cent, although there has been a recent dip due to falling oil barrel prices. We're seeing this general increase because prices on things like gas, electricity and food are all on the rise bringing higher wholesale prices. A high inflation rate could potentially affect currency exchange rates as well, which could create a slow down in exports.
What this means for your business: Higher inflation impacts every element of the economy, increasing costs on all goods, services and commodities. It can also spark a rise in outlook uncertainty, which in turn hurts business confidence. In short, higher inflation means higher costs.
When consumers aren't spending, your business isn't making money.
Spending in the Australian economy was a bit slower in recent months – the RBA chopped the cash rate to 1.5 per cent. While this is an all-time low for the RBA, they are adamant that it does not mean the Australian economy is struggling. Instead, they paint a picture of sustainable growth in effort to prevent further inflation.
What this means for your business: Ideally, greater investment. By cutting the cash rate, the RBA gives banks room to bring down their own interest rates, which could enable greater spending and investment from Australian businesses – this has been quite sluggish in recent months.
Right now, the Australian economy has grown by 1.7 per cent which was slower than a 2.4 expansion in the last quarter, reported Trading Economics. This made it the weakest annual expansion since 2009. However, Australia still has one of the world's largest economies (13th largest, reports Australian Trade and Investment Commission) with high performing, innovative industries. It is for this reason, that analysts are not yet concerned about the minor slump.
What this means for your business: When economic growth begins to slow down, businesses and consumers alike start to tighten up, as there can be a perceived lack of return on investments or increase in costs of doing business. Confidence drops, spending drops, and plans for growth get put on hold. However, conditions are not dire at the moment – the National Australia Bank's May confidence survey of businesses showed some of the best confidence in the economy since 2010.
Oil prices, political change, even minor shifts in employment levels can have a significant butterfly effect on the wider economy. Your risk environment is always changing, which is why you must be proactive in protecting your company and its assets. By applying Trade Credit Insurance to your business, you have protection against customers who have been affected by troubling economic times and may miss payments. Contact our team to learn more about this tool today.