Readers Respond on State of the Australian Economy Part 2

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.

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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.

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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.

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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

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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.

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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+,
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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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