We often use this statement when referring to fashion. I, for one, have attempted to plead this rationale to my wife in order to prevent an old favourite shirt disappearing and I am sure there have been many other examples. Recently however, I was also thinking that this statement applies to the many aspects of the economy we are experiencing.
For example, interest rates have continued to fall and tax cuts have been introduced to stimulate the economy. In my opinion though, the tax cuts will not do enough to kick start the declining economy and the Australian Government will need to look at others, such as infrastructure projects, to stimulate spending. Could we see another School Building Program, which was rolled out just after the last market crash to get Australians to spend? If not schools, could we see it in areas of health and aging industries?
Surveys have found that most Australians will use the money from the tax cuts to offset the increasing costs of living. Likewise, the interest rate reductions mean Australians will try to decrease their debt levels by reducing their home mortgages, all of which to cushion the inevitable housing interest rate rises. As you can see, it’s not about spending those extra few dollars but about saving them. When I entered the real estate market in the late 1980s, interest rates were about 18% and I certainly don’t want us ever to go back to those days.
I recently read that one of the side effects of online consumer spending is the decline in the patronage of shopping centres and subsequently an accelerated decline in retail outlets, with many closing down. This is a very real issue in the US as well as Australia and New Zealand as the demand for online businesses such as Amazon is increasing at such a fast rate. Interestingly, China is bucking this trend due to having what they describe as a ‘mature online consumer market’. There has actually been an increase in demand for shopping centres, as Chinese consumers prefer a mix of both online and physical presence to meet their demands.
Industry disruptors will often change up usual practices. If we are to be successful, we need to accept the disruption however many will still default to characteristics from the old way of doing business. This could easily be the message from Banking Royal Commission. Banks have moved away from understanding borrowers’ capacity, including their assets and income levels to provide loans which they had no way of repaying, to the other extreme whereby they have made it very difficult to obtain a loan. We are now told however, banks are reverting to attempt to find the right balance when assessing loans. Such borrowing practices are reflective of the 1990s so it does seem that the old can be new again.
We cannot predict the future but we can plan. From meeting with other partners from our various Nexia offices around the world, it is clear that we all share similar views of our economies. When contemplating business initiatives you can feel confident in knowing that our Nexia team is experienced and in some cases have been there before.
