One of the most interesting things about the business cycle is that we have not had a proper one since the Global Financial Crisis.
Since the GFC in 2009 governments have repeatedly interjected themselves into markets to stop any serious issues.
The problem is those issues are precisely what a functioning open economic market should have.
When we go through a business cycle, which is simply put a change in debt, change in employment, and loss of businesses, we see a reallocation.
Generally this reallocation process is called a recession.
A reallocation of financial and human capital into more productive endeavours.
A business that could not afford its debt or compete in the market goes bust, the employees move to another firm, making that one stronger, and customers get better products or services because only the better firms survive.
Creative destruction is a term used for this. The reason I find this very interesting is that since the GFC interest rates and the cost of debt has been falling towards zero and staying very low.
I believe we are in a "higher than we want, for longer than we expect" situation with interest rates.
Meaning they are never going back to near zero, and will bubble along at relatively higher levels for a while to come.
We have seen the highest number of businesses collapsing in years recently, and a large factor of that is that the business could not afford its people, debt, or compete properly.
It is critical that a business has a strong level of capital, money, enough to pay for all costs for 3 months or more. That is a good aim generally speaking.
If your business does not have this, one way to get it is putting in place an overdraft or line of credit.
There are lots of options for these products, from banks or non-bank lenders, using property or not as security, and there are trade offs with any options.
We work with many banks and lenders that offer these and can help you get the capital your business needs to run and grow. Facilities like this give your business cash flow to compete and grow.
Just remember...
Revenue is vanity
Profit is sanity
cash flow is king
Here is an interesting mix of news for your this month, covering commercial property, the economy, the vehicle market and superannuation:
Commercial property trends
Unemployment may be near peak
Car delivery times at 65 days
ATO issues super reminder
Read more below.
One of Australia's leading commercial property experts has identified five trends that are likely to play out over the rest of 2024.
The first trend is a retail resurgence, according to Ray White Group Head of Research Vanessa Rader. This will be driven by population growth and limited new construction, which will increase demand for quality retail space.
Second, there will be emerging opportunities in the office sector. “The increasing yields in this sector offer attractive prospects for those with a long-term investment horizon or those willing to undertake redevelopment or renovation projects during the current cycle, positioning themselves for an anticipated upturn in office occupancy in the coming years,” she said.
The third trend Ms Rader identified was sustained demand for assets under $10 million, as a lot of owner-occupiers and investors would be competing for these properties.
Fourth, we can expect more major property development activity, “fueled by a nationwide housing shortage that continues to bolster both property prices and rental rates”.
The fifth trend, according to Ms Rader, is that more new investors will enter the market, with the support of buyer's agents.
The unemployment rate has continued to creep up, reaching 4.2% in July, compared to just 3.7% in February, according to the Australian Bureau of Statistics (ABS).
However, the Reserve Bank of Australia (RBA) doesn't expect it to rise much further, forecasting that the unemployment rate will be 4.3% at the end of this year and 4.4% at the end of next year.
“The participation rate remains strong and average hours worked have proven resilient. Job vacancies have come down, but they are still higher than before the pandemic,” according to the RBA.
"The unemployment rate is expected to keep slowly rising until early 2025 but the expected recovery in GDP growth should continue to support demand for labour.”
The economy grew by an annualised rate of just 1.1% in the March quarter, based on the latest ABS data, and the RBA expects growth to fall to 0.9% in the June quarter. However, growth is expected to rise to 1.7% by December 2024 and 2.5% by December 2025 – which is likely to lead to greater business profitability and an increased demand for labour.
If your business is planning to invest in a company car, there are three main things to think about when you do your research – the price of the vehicle, the reliability of the vehicle and the amount of time you'll need to wait to receive the vehicle.
That's because there's just as much variability around waiting times as price and reliability.
The average waiting time for a new car in June was 65 days, according to the latest data from Price May Car. But it was significantly longer for some vehicles, including the Toyota Hiace (278 days), Toyota Corolla (216 days), Hyundai Staria (133 days), Ford Everest (127 days) and Suzuki Jimny (119 days).
By contrast, some vehicles had short waiting times, such as the Subaru Impreza (15 days), Subaru Forester (16 days), Mazda CX-5 (19 days), Hyundai Tucson and Volkswagen T-ROC (both 21 days).
Please contact me before you start searching for a vehicle, so I can compare the market and organise a pre-approval. That way, you’ll get a good deal and know your budget.
The first superannuation guarantee (SG) payment of the 2024-25 financial year is due on 28 October, as it is every year.
Thereafter, payments are due on 28 January, 28 April and 28 July, as per normal.
The Australian Taxation Office (ATO) has urged businesses not to miss these deadlines.
“The ATO takes non-payment of SG seriously,” it said. If you miss a deadline, “even by a day”, you must pay the super guarantee charge (SGC) to the ATO and lodge an SGC statement within one month of the SG deadline.
The SGC is not tax-deductible and is more than the super that was supposed to be paid.
One common reason businesses are slapped with an SGC is because their super payments don't reach their employees on time.
“Remember, if you use a commercial clearing house, you need to allow time for payments to reach your employee’s super fund by the due date,” the ATO said. “The due date is the date payments are received by the super fund, not the clearing house.”
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