The booming economy – Wow
Article by Cameron Research
We recently finished the latest round of interviews with our SMEs across Australia. The experiences of those business owners are more polarised than anything Cameron Research has seen over our last 29 years of SME research. Some are struggling, but many SMEs are flying. In fact, there’s a very good chance the economy is overheating. If we were pressed to put percentages on it, we’d say that 10% of SMEs are struggling, 40% are going okay, and 50% are doing extremely well – that probably smells about right. Think about that – half of them doing extremely well. Wow.
Sorting the winners from the losers in this environment reveals that it isn’t about the business size, the age of the business owner, their length of time in their operation, or anything like that. It is partly a function of location and partly a function of industry. The most galling issue for those that are struggling is that it is often out of their hands. How does a live music venue survive when customers have to socially distance and can’t dance? How do businesses that are dependent on tourists cope when there are no tourists? Have you ever had a dental check-up via MS Teams? No, it wouldn’t work. Neither can a dentist when he’s locked down. We can talk about pivoting and embracing change all we want but the reality is that there are businesses that have copped it in the neck, simply by virtue of what they do and where they are based. We often mention our pharmacist with five pharmacies spread around Victoria. She’s such a clear barometer as to what is going on in Victoria. Her CBD pharmacy is dropping $1,000 every day. Every single day it loses a grand! Anyone who has been in the Melbourne CBD and has been bowled over by the tumbleweeds knows why. How does she cope with that?
And yet, these businesses are in the minority, thank goodness. There are far more that are going absolutely gang-busters, and that is what is most striking – the gulf between those that are doing well and those that are doing poorly is incredibly vast and unlike anything we’ve seen before.
Those that are booming look out and see an economy that basically has full employment, interest rates are extremely low, and consumers and businesses are still living off the fat of the stimulus payments from federal and state governments… yet consumers cannot travel overseas. Adding icing to the cake, demand for Australia’s key export (iron ore) is at an all-time high. Sure, they can’t find staff, but they can’t have everything their way! What a cocktail. Consider heady comments such as the following:
- “It’s really good. REALLY good. We’re fully booked until January of next year. That’s 3 or 4 shoots a week booked for the next 7 or 8 months… I think it’s because people can’t travel and they had us on their bucket list.” (Vintage photography, 1 FTE)
- “The COVID-induced focus on the home has been helping our business big-time. The trading conditions – for self-storage – are as good as I can recall… If you need renos, or if you’re moving, or if you are working from home and you want to declutter – well they are all positives for our industry. It’s a real purple patch.” (Self storage, 450 FTEs)
- “We’ve had 35% growth this financial year compared to last year. It’s been incredibly busy – although I will say that once there’s a lockdown announced, the phones go completely dead. But our backlog is incredible… 12 months ago the wait time for drapes was 4-6 weeks and now it’s 10-12 weeks.” (Curtain design/installation, 5 FTEs)
- “There are two speeds, regional and metro. Metro is good but regional is unbelievable. Like Warrnambool – normally we’d sell 25 developments a year, in three months we sold 78! Now we’ve got to figure out how to build them!” (Resi-property development, 400 FTEs)
- “SA is going crazy. You can’t travel outside Australia and I think people are simply spending that money at home. I was in regional SA last weekend and it was GANGBUSTERS, trailer parks are full, caravans everywhere, AirBNBs booked out… in our business it’s very good, we’re really busy and people are out and about. We’ve just opened our fourth venue and it’s going better than we planned.” (Hospitality, 40 FTEs, 200 casuals)
- “We’ve had a very strong bounce-back – it’s gone nuts in terms of demand. Once everyone adapted to this pandemic, we’ve had consistent hiring which got quite strong towards the end of last year, and it’s remained strong.” (Recruitment, 12 FTEs)
- “We’re unscathed up here in Cairns. There’s people everywhere and I’m turning customers away. I can’t keep up with demand, I’m working 12 hour days and I still can’t keep up.” (Hairdresser, sole trader)
- “We’ve been very positive. People are buying online and we’ve kept our supply line full which has helped because some of our competitors haven’t been able to supply. We’ve worked hard on our customer service like introducing live chat and a quicker turnaround on orders… And we’ve continued to promote, we haven’t stopped that. So it has been business-as-usual in our approach and sales have been very good.” (Import/wholesale/retail, 90 FTEs)
We have dozens of stories like these. They’re not your typical ‘yeah, business is okay’ comments, are they? Unsurprisingly, a number of the business owners we’ve interviewed think the economy is in real danger of overheating – if it isn’t already. They wonder if the RBA is tuned into different businesses – because, in THEIR business, it’s going wild.
Qualifying comment: Maybe the current lockdowns will take some heat out of the environment. Time will tell, but there’s a lot of momentum in this boom.
Conclusion
The contrast between the winners and the losers in the SME environment has never been more extreme than it is now. Those that are struggling are often victims of factors beyond their control. Yet for each business that is struggling, there are many more that are booming. They’re pinching themselves to make sure that it’s not a dream. Is the economy overheating though?