JOE HOCKEY HAS NO IDEA ON SMALL BUSINESS - BELIEVES RBA CAN DO HIS JOB FOR HIM

Why is it so difficult for people to see the reality of what is happening? Is it ignorance or apathy or a combination of both? Perhaps it is an awareness issue or a willingness to learn? Is it the mainstream media propaganda or simply a natural human instinct to be positive, if the world gives us lemons we just make lemonade!

Time is ticking and this clock is not broken yet! I have learned over this last 12-18 months that I see things early and this drives me crazy. I find it perplexing that something that seems so obvious is being overlooked. I am confused by the strength people have in their almost religious devotion to have a panglossian view of the world and the economy or how dominant an ego can become in the decision making process.

The ego is powerful, just ask politicians and central bankers. Today I will take aim at Joe Hockey the federal government of Australia’s treasurer who thinks Glen Stevens and the Reserve Bank of Australia can do his job for him. There I said it, Joe Hockey thinks the RBA cash rate determines business investment at these record low levels and that his role is to pressure the RBA into cutting rates in the hope of producing growth instead of suggesting real government investment programs that will assist SME’s boost productivity. It seems Joe Hockey is confused about what drives productivity, innovation, cost savings, growth and ultimately in the end tax revenues.

Joe Hockey says the Government has to cut spending on the one hand then expects SME’s to boost investment after a 25 basis point rate cut. The government must cut spending and investment because of a debt crisis it doesn’t have at the same time he expects SME’s and their owners to take that as a positive signal for the economy. Sorry Joe, I am a multiple small business owner and I am not buying it, and looking at the Capex numbers out today I am not the only one. I won’t invest if you won’t, how dare you try and tell me I should and you are way off base thinking that I will.

I know I know, I am a doomsayer, chicken little, negative nelly, party pooper, Debbie Downer. Well that is what many think. I say I am a keen economics student, an obsessive compulsive learn-a-holic and a realist. I am calculated, considerate, analytical and a pragmatist. I have to be all of these things because I am a business owner, if I do not possess these skills I risk making a poor business decision, if I don’t think about the future I risk becoming a failure statistic.

I am often humbled by the mentors I have in my life at present and of course those that have played a role in the past. It has been a melting pot of true pioneers and wild and almost crazy entrepreneurs. My upbringing was definitely an unusual one, Sunday lunches were often a front for business meetings between my father and various business partners in whatever business needed attention at the time. I was fortunate enough to get to learn from experiences they had as a first hand observer to the debates over decisions, the decision itself, the implementation of that decision and then ultimately the result of the decisions.  I am now a mongrel breed of all those entrepreneurs, moulded and forged and educated by some unbelievably loving and switched on mentors.   I was blessed with the opportunity of gaining business experience and knowledge without having to learn the painful lessons on my own.

My experiences with academics and my observation of politicians is that almost all are clueless on how small businesses operate.  Many have little experience or understanding in what a successful business owner really considers when it comes to making a major business decision. When the RBA announced its recent rate cut I was amazed to hear the Australian federal government treasurer Joe Hockey say that the cut should be a boost for small business investment, like a 25 basis point rate cut was going to stir up some business borrowing. My reaction was, really Joe? Are you serious?

Let me give you a little bit of a lesson on SME’s Joe, read the bullet points below and you will see an emerging trend and hopefully it will dawn on you why your “rate cut will spur business investment” comment was… errr.. Stupid.

• I don’t look at interest rates when I am considering employing someone, I look to see if I have a growing market to sell to, what competition do I have, what are the work place relations laws like, what red tape could I get tangled up in. I look at likely economic conditions, does it look like it will be a tail wind or will I be facing a headwind? The cost of borrowing is way down the list, not worth a mention.
• I don’t look at interest rates when they are at historical lows and I am considering a new investment in plant and machinery. Again I look at if I have a growing market to sell to, or how will I get a return on investment, does this machine save time, reduce labour costs, increase safety and efficiency? Does it provide a competitive advantage?
• I don’t look at interest rates when they are at historical lows when considering a new product range. Again I look at, is there a market, what are the competition risks, what does the risk/reward multiple look like? Will this new product range help me boost existing product sales to the new customers I attract? I don’t care about a 25 basis point rate cut when rates are these historical lows.

Need I go on? Or are you seeing the emerging theme Joe Hockey? I won’t expand my workforce  if there appears to be economic uncertainty. I won’t invest if I don’t see a market growth environment and I am certainly not encouraged to innovate when I fear policy makers are asleep at the wheel. If you think I am wrong Joe, look at the Capex numbers released today. The fact is no matter which way you try and spin it the 25 basis point cut you pressed Glen Stevens into has been a flop. Sadly Joe your biggest failure is coming and it will be a crisis not just for your political career but for the liberal party at the next election.

The infatuation, no obsession with a budget surplus will drive Australia into an even deeper recession and will accelerate the timing on when it arrives. The solution isn’t to cut interest rates, it is not in cutting back government spending, it is about the opposite, we need real growth investment, a big government stimulus program NOW.

Australia needs a government committed to a targeted investment on infrastructure that will boost Australia’s productivity. It is not about public debt, it is a private debt issue. The only way out of this private debt issue is to help with infrastructure, government spending that targets productivity gains. Joe Hockey stop comparing the federal budget to a household budget and start comparing it to a business budget. Give Australians a business plan for the borrowing, show them that the investment will boost productivity, and that the return on the investment will help us not to reduce not only public debt but the private debt that is strangling our economy.

So quit peddling the budget crisis line and start getting serious about targeting GDP boosting productivity investment before debt deflationary recession swallows the Australian economy whole. A national economy and public finances should not be run like a household budget, it needs to be run like a business, with a plan that targets return on investment. It requires a grown up government to focus on policy not politics, maybe it requires a think tank of successful entrepreneurs and business owners, not just academics and politicians… but what would I know… oh other than I knew the Capex number was going to be a disaster today and you thought the 25 basis point interest cut would spur SME investment. If that came across as sarcastic, it’s because it was and if this whole blog sounded like it was written by a frustrated person, it’s because I am.