Industry News

Time to end the holding pattern

With 132 days (at time of press) to the federal election, Australian industry is in a holding pattern. Manufacturers and suppliers across the board are awaiting the September election outcome rather than acting prudently now.

It?s a strange attitude for businesses to take, given that industry ? especially the construction sector ? can be its own worst enemy in lean times. The president of a major international equipment supplier told a news conference I attended that it is common ?on the grapevine in Australia, when things start to turn down? for the talk to be ?10 times more negative than it really is?.

?It?s like the sky is falling in,? that person said. ?The first people who talk are the little traders and the brokers, who go, ?Oh my God, the world?s stopped, no one?s buying!?? He added that from the second quarter of 2012, ?a shroud of uncertainty? crept into the construction market that has impacted on the sales and orders of plant and equipment manufacturers and dealers. He attributed some of this uncertainty to the fall in commodity prices, the high dollar and the introduction of the carbon and mining taxes. However, compared to the rest of the world, he thought customers? pessimism ?was unwarranted.

The business community is hopeful that the September election will produce a government that is more responsive to its needs and will generate favourable economic conditions for investment. However, this is like wishing for a pot of gold at the end of the rainbow. It?s up to business itself?to kickstart the economy and improve its ?own productivity.

An incoming government will be committed to cutting expenditure and rolling back handouts. It may cut red and green tape but it will expect the market to disentangle itself and build its own fortune. Government will expect businesses to take the lead, not the other way around.

While an incoming government may also be committed to an infrastructure boom, it will expect the private sector to foot most of the costs. Given that the fiscal policies of past federal and state governments have notoriously detracted from growth and recent public/private partnerships (eg BrisConnections? Brisbane airport toll road/tunnel, Brisbane?s Clem 7 project and Sydney?s Lane Cove and Cross City tunnels) have left taxpayers footing the bill, there are strong grounds to query if there will be any economic sunshine post-September.

And what if the unthinkable happens and the current regime, so disliked by industry, is returned against all odds? The president of the international equipment supplier above alluded to the hostility of the US business community to the Obama Administration in the lead-up to last November?s US presidential election. ?The US election came and surprise, surprise, a whole bunch of people were upset and today they?ve accepted [the outcome] and people are going back to work,? he said.

Given that nine months will have elapsed between the poll announcement and polling day, and it will take another 18 months for a new government?s policies to take effect, two and a half years is a long time for businesses to sit idle. Is it really desirable to wait for an election outcome when time is money?

My advice is to not waver from growing your business now. In fact, in lean times it is recommended that quarry operations spend on capital, particularly in upgrading and replacing plant and equipment for the good times ahead. That?s not to say that in the lead-up to the election you shouldn?t be lobbying your local MPs about the importance of future infrastructure investment but don?t take your eye off the ball now! You should be ready for when things do take off again ? and you?ll be creating confidence with your suppliers and dealers as well.

At a time when a Price Waterhouse Coopers study is urging the mining industry to improve its productivity rather than focus on digging up greater volumes of minerals, what are you doing about your own productivity? No government post-September will be sympathetic if you go under!

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