John Linton
.......Australia November 2007 - June 2009?
I read this morning's financial and technical on line media this morning with a little more care than usual as I have some concerns about what may happen in Australia later this year if, as the most obvious current example, General Motor's disposes of its Holden subsidiary in Australia. This wasn't very encouraging:
http://online.wsj.com/article/SB124390025302374483.html#mod=article-outset-box
but the problems that GM has in the US are so overwhelming that it adds nothing to the information regarding the Australian Holden's future. While I personally wouldn't buy a Holden I understand that many other people do and that Holden, and just as importantly the many hundreds of suppliers to Holden, provide employment for up to 10,000 Australians. While the Australian management at Holden are very positive about the company's future (as are the Labor government who have ponied up over $A6 billion in actual and promised subsidies) you only have to look at GM's OPEL and Vauxhall subsidiaries in the UK to see what has happened there - and that situation benefits from the deeply vested interests of a giant Canadian GM parts maker and a Russian oligarch with a huge vested interest in picking up a modern manufacturing plant at fire sale prices. Neither of those fortuitous circumstances seem to apply to Holden.
However, irrespective of what happens in the particular case of Holden (and I certainly know as little about that as any other casual observer) my concerns are simply based on the fact that if 10,000 Australians lost their jobs via one large event (such as the closure of Holden either totally or a significant part of it - which seems inevitable) then will that be the 'trigger' for a domino effect as suppliers and creditors to Holden also have to close up and the banks and the Labor government lose their loans and subsidies?
As the Australian media constantly points out - Australians generally and Australian businesses generally haven't been affected by the GFC yet and that view seems to be turning to the even more optimistic view that "the worst has passed" and Australia may not be any more badly affected than it has already experienced. It would be nice to believe that is true or even partially true and I, personally, haven't seen any negative affect on our tiny business or in our personal lives. Which begs the question as to why there is a just announced massive government deficit and why tax revenues from business are said to have dropped like a stone - and of course the share market has almost halved and.....please add the details you are aware of.
In the cited article the main reference is to continuing denial in the face of irrefutable evidence of massive systemic financial problems that were so obvious it is impossible to understand why the CEO and board continued to deny their existence right up to the point where the company ran out of money. Is what is being said in Australia the same/similar denials that are so obvious to see in the GM statements for the past year? Krudd keeps talking about how his plans are firmly in place to "recover from the recession"....but there is no sign that there is a recession if you ignore aren't a BHP, PBG etc recently ex employee who has lost their job or a Holden employee who is on one half or one third of normal hours. To the contrary, the Australian media point out that retail sales are booming, housing starts are booming and that, somehow, even the terms of overseas trade are moving favourably.
But if retail sales are booming what is to be made of this:
http://www.smh.com.au/national/sales-fail-to-excite-sydney-shoppers-20090603-buqx.html
.....another example of why I find it hard to discern a pattern when so much information provided conflicts with information from other sources.
Perhaps the PRC, Korea and Japan will continue to place orders so that BHP and Rio can continue to dig up Western Australia and Queensland and ship it off to Asia and that will keep everyone (except the merchant bankers) employed and restore the government's tax take and will allow everyone else to keep buying large screen TVs and Holden and Ford and Toyota cars? Perhaps it's as simple as that.
Whatever the situation actually is, I can't get even a glimpse of an indication of what might happen over the coming months and I have done my absolute best over the past eighteen months to try and get some sort of 'layman's' idea. Our payment defaults on the June recurrent bill run were slightly up on the first pass but after a day have been paid down to below what they average for the third day of the month so there is no sign there though there were two businesses that defaulted on their monthly payment which may be some sort of sign.
Perhaps it will all become clearer soon?
Then again:
http://business.theage.com.au/business/australia-dodges-recession-20090603-buyq.html
perhaps not.
Maybe I'm just losing my nerve after so many years of starting up a small business and then trying to keep it 'alive' at an age when all sensible people should be doing anything but that.