Newsletter – March 15 2019

Ross Greenwood: Give the fact that you are going into retirement from parliament, and given what you know about franchisees – would you be confident to buy a franchisee in Australia right now?

John ‘Wacka’ Williams: No, I definitely wouldn’t. Not unless I could see the true correct figures Ross.” (Listen Here)

Newsletter – March 15 2019

Australia is slowing down.

Last week the National Accounts for the December Quarter were released and according to the Australian Bureau of Statistics, the economy grew by only 0.2 percent during the quarter, under expectations of an increase of 0.3 percent.

This brings the year-on-year growth to only 2.3 percent, also below the expected 2.5 percent.

Remember the Reserve Bank, which downgraded its growth forecast this year from 3.5 percent, still thinks it will grow 3 percent. As time goes on, this forecast seems very wrong.

This will of course have a knock on effect and we will be lucky if the economy is able to reach the 2.8 percent year-ended pace forecasted by the RBA just a month ago.

Now, there are a lot of factors as to why the economy is slowing down – declining house prices are a major one, rising cost of living, declining household savings, lack of business confidence…these are all factors affecting the Australian economy.

With Australians official interest rates remaining on hold at emergency lows of 1.5 percent for the 36th meeting straight, it was long predicted the only way the rates can go is up. Not anymore. Economists are now predicting rate cuts – in fact, two by the end of the year.

NAB’s chief economist Alan Oster this week joined the likes of Westpac, UBS and AMP tipping rate cuts are needed to get the economy back on track.

I do also think interest rates are more likely to be cut than raised.

However, if you add to this the decline in business confidence…you can see Australian’s economy is most definitely waning.

This week, fresh data from the NAB Business Conditions survey showed a softer outlook from business.

Business conditions fell by 3 points to +4 index points in February, driven by declines in profitability.

NAB Group chief economist Alan Oster says consumer demand and the lack of margins have resulted in the fall in business confidence.

“It’s the old story – consumers aren’t getting much of a wage rise, they’ve got a lot of utility bills to pay, their debt levels are very high, house prices are not helping – so anything they can avoid buying…they do.” (Listen Here)

 And as a result, “conditions have materially deteriorated further to below average levels in 2019”.(Listen Here)

And if businesses are not confident because there is a lack of people spending in their stores…they are not likely to raise wages are they?

Its all about this knock-on effect – households are having to spend more for the basic cost of living, wages are not rising fast enough and as a result, customers are not spending at the shops causing business confidence to decline.

On the back of the national accounts, shadow treasurer Chris Bowen said the economic growth figures were the second weakest quarterly number under the current government and attacked the government on poor wage growth.

Now, the national accounts showed that while wages are rising and disposable income of households only increased by 0.8 per cent and 2.1 per cent through the year.

This of course spurred on calls for a ‘living wage’ – first raised by Labor Leader Bill Shorten. He is preparing to legislate a living wage if he becomes prime minister, in a move that would boost minimum pay packets.

This move set off alarm bells for businesses right around the country.

Shorten called business leaders opposed to a rise as “fat cats”, as he foreshadowed a change in the law to encourage the independent Fair Work Commission to set a higher minimum wage.

But the Opposition Leader is missing a key point here – a lot of the companies and businesses who employ staff on a casual, hourly basis are mum and dad businesses who cannot afford to give large wage rises when they are struggling to make ends meet themselves. They are the owners of ice-cream stores, they are franchisee owners, they are the local hair dresser or the local grocer. Raise the minimum wage and how can you expect these businesses to continue to employ, or to even survive.

As the CEO of the Australian Chamber of Commence and Industry, James Pearson, says “One person’s wage rise is going to cost another person their job.” (Listen Here)

Within hours of Bill Shortens comments – business threatened job losses.  And this brings forward the question…isn’t it better to be with a job than without?

You are certainly bringing in more than if you were on the dole, you are able to pay for the basics…the dole doesn’t allow that.

The ACTU is calling for a $43 weekly rise to the minimum wage to eventually create a living wage and alleviate poverty.

But – this is not the answer. Raising the minimum wage will not ease poverty.

The director of the Hilda Survey, Professor Mark Wooden, says instead to increase the Newstart allowance as a start to alleviating poverty.

“I think they’re kidding themselves when they’re saying that a full-time, full-year, minimum wage worker, is below the poverty line.

“The poverty line is about 10 per cent and this is mostly households where no one is working.” (Listen here)

Australia’s economy is slowing and wages have just become an election issue.

9News –

How choosing the right super fund can save you $120,000 in retirement – Watch here

Money News –

Is striking the way to go for higher wages? – Listen here

Highlight –

Are Garnishee notices appropriate action for the ATO? – Listen here

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