The Buzz of Rising Business Confidence

All around the nation at the moment there is a rising perceptible buzz.

You hear it when you talk to people. You feel it when you have to wait for them on the phone, or for a coffee, because of how busy they are. Imagine what it would be like if we weren't over taxed and over regulated, for there is absolutely no doubt about this.

So what better way to invest than in a way that is good for the economy, the nation, and at the same time reduces tax. From over-burden to something a little more palatable. It’s something that impacts beyond property investing, but greatly influences the stimulation of business activity. It’s called negative gearing.

An Election Decider

So the up-coming Federal election is even more important to those in the business who, like yourself, fight hard through the bureaucratic jungle and the banks obstinacy to deliver affordable housing across this great nation.

Ultimately the ALP will make it all the more difficult for Australians to afford property investing, while the Coalition has finally said that it will not meddle at all with negative gearing. This issue alone would decide my vote. I am not taking political sides here. I have voted for both parties in the past, been to university with Anthony Albanese and advised Joe Hockey on a couple of occasions. All I care about is getting smart policy in place. On this issue however, I think things become crystal clear.

One party is for controlling private aspiration, while the other encourages economic activity by us all. This election is turning into something quite defined now - a development which, to be honest, was becoming a little unexpected.

The Best of Both Worlds

In my big picture presentations I talk about the US and Europe being the “old first world”. Australia and Canada being a little "two footed" in that they have a foot in both the “old first world” (that is mature democracies with a century of rule-making that shows no sign of stopping), and the “new first world” (China/Asia and Latin America, characterised by far less regulation, lower taxes and higher, immature capitalist profit margins).

What has saved Australia in recent years has been having a foot in the “new first world” via our commodity exports. We have to release ourselves from the pattern of rule-making and boxes that must be ticked in order for things to happen - at least back to something more reasonable than where we are now. Yet there is hope delivered to us from the great region of Asia.

With the possibility of a double dissolution election, where the incapable Senate would be swept away by full elections, alongside a discernibly bourgeoning rise in general demand, businesses will be forced to act - in a positive way.

The weight of the GFC and other issues, which were more problems of sentiment than real direct linkage, is indeed lifting. People are beginning to see for themselves, as we always said would be the case, that China is fine and so too is Europe and the USA.

There is now a willingness to accept that expanding one’s business, including the workforce, could again be a sound business activity. So biased has been business management toward cost cutting for so many years, that many businesses have begun to generate significant problems for themselves through under-staffing.

We are seeing a trend down in un-employment, albeit still too high and never needed to get as high as it did.

My point, however, is that the on-going success of China/Asia and the build up of artificially suppressed natural demand in our country (fueled only by negative sentiment ) means that right now the nation may be beginning a fresh surge of economic activity. A double dissolution election won by a non-negative gearing meddling government would, in fact, further accelerate this embryonic groundswell of economic resurrection.

The outlook for the Australian economy may well be stronger than any of us anticipated. May the buzz rise to crescendo!

Clifford Bennett International Economist clifford@cliffordbennett.com.au www.cliffordbennett.com.au