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The Economic Scene

In the early months of the financial year, the economic scene is sluggish, with lower than normal economic growth, low inflation and a cut in interest rates. There are still major problems in certain business activities and locations around Australia. The key areas for small business operators to monitor are:

Growth of the Economy (GDP – Growth Domestic Product)
Inflation
Interest Rates
Currency Rates
Government Policy

Whilst there has been some positive growth, it has not yet returned to the 4% trend at which the economy has generally performed. It is likely to continue in this manner for the reminder of the financial year, unless there is a major wages breakout, which will significantly affect the inflation rate.

The Australian dollar is very high, especially compared to rates that were evident 41/2 years ago, when the Australian dollar was 57 cents against the US dollar. The US dollar rate against the Australian dollar is currently at $1.05, which is good news for importers and Australians travelling overseas, but not for Australian exporters or the tourist industry relying on international tourists visiting Australia.

Cashflow management is still a high priority issue for SMEs. If you are preparing budgets for this financial year, it is a good idea to prepare three separate sets of budgets, comprising:

Most likely outcome;
Most optimistic scenario; and
Most pessimistic scenario.

If you would like assistance in the preparation of budgets and cashflow forecast, or a review of your cashflow management procedures, we can help.

We greatly value our clients and are committed to honouring the trust they place in us by creating visible results for them. Get in touch to find out how we can help our clients maximise profits, minimise tax, and invest the balance for growth.

written by:

McKinley Plowman