What a change a quarter can make. This time last quarter new home builders’ phones were dusty and laden with cobwebs; new home loan enquiries were barely dribbling into the banks and everyone was waiting, clutching their purse strings and holding their breaths waiting to see if one group of politicians (slightly to one side of the centre line) would be replaced by another group of politicians (just slightly to the other side of the centre line). Would they romp to power with a slight numerical advantage?
Now the great momentous event has occurred and we have a new government … and what a change has been felt, ironically, without many changes being made by the aforementioned government.
Many changes are being felt in the financial sector – a friend of mine in the lending space told me that as soon as the election finished the floodgates opened with enquiries and a stampede of applicants replacing the tumbleweeds of ‘yestermonth’.
A client I was speaking to last week handles sales for a group home builder – same story, with hundreds of serious enquiries flooding in.
These changes will be very evident when next month’s credit reports come out, and with any luck we start to see a real turnaround from the horror that has been reflected in many past reports.
I have seen a large increase in the number of people wanting to meet with me to prepare for higher volumes of business, many taking this opportunity to update systems and processes regarding credit.
One thing being recognised is the value of immigration, be it permanent or temporary, for work or study, to our country’s economy and to our lifestyle; the conversation at nearly every meeting I have been in over the last year has at some point gravitated to the business owners inability to find and retain good staff, especially in certain industries. The cries of, “these immigrants are taking all of our jobs”, seem to have turned to, “why is there no one working?”, or, “why are the shelves empty?”
It seems strange that all of the jobs that immigrants had been “taking” remained unfilled once the majority of work and study tourists left the country? Maybe that just highlights the difference between talking about something and actually getting up off one’s buttocks to do something about it.
Now we are able to breathe a sigh of relief. We can feel hope again that we all may not end up having to live in our cars, or in our parent’s or friend’s garages, which is of course a good thing. But let’s not forget that as a society and an economy we are still paying for our recent past and it may take some time for the hangover of the Covid party to fade away.
So let’s look at the highlights of the latest Centrix data to see just how much Berocca we need:
Company Closures are up 72% on last quarter – a massive 15,970 companies have closed.
Even taking into account that probably a quarter of these will be holding companies, dormant entities and other non-trading companies, this still is a huge number.
1,875 companies have gone into liquidation, which is 40% up on last year. Speaking to a number of insolvency specialists, I feel this number may be lower than expected due to a large number of “uneconomic to liquidate” businesses that do not have enough realisable value to warrant the tie and effort of liquidation.
Commercial defaults are up 14% on last year, however, again, I feel this may be lower than actual as many creditors have extended their collection cycles beyond normal terms due to not wanting to appear punitive to the unfortunate.
I am very glad that the commercial mood has shifted, business owners are looking forward to the future and many who were expecting the worst have been delightfully proven wrong, but until we reach the top of the hole, let’s not let our guards down.
As my old boxing coach used to say, “go hard, but be careful”.
Understand the risks, protect against them, and have a plan for each possible outcome.
Just a thought.
Related: If you don’t love it, don’t do it