We know the global financial crisis had its genesis in the United States when financial institutions decided to lend a lot of money to a lot of people who couldn’t repay their home loans.
We know that when people couldn’t repay those loans they simply put their house keys in an envelope and posted them to the banks.
As a result the banks received lots of keys and a load of bad debts.
The resulting shock wave has been felt across the United States, Europe and Japan.
Stock markets crashed and people have watched their accumulated wealth fall in value – particularly through superannuation holdings.
It is therefore a particularly worrying time for the retail sector.
Australia is not immune from the contagion – but we are better placed than just about any country to withstand its worst effects.
We need to remain optimistic because in these times of uncertainty the most precious commodity of all is not gold or silver, but confidence.
If the retail sector and small businesses in particular remain confident, then we will see it through. But if confidence is driven down by doomsdayers, then that in itself can be a self-fulfilling prophecy.
The Rudd Government built a $22 billion surplus in the May budget.
That was achieved in part by cutting growth in government spending from five percent real growth to just one percent.
The Government built the second biggest surplus in 37 years.
That surplus was built for a purpose. It was built for hard times. And those times have arrived.
That’s why the Rudd Government recently announced a $10.4 billion economic security strategy that will provide an immediate fiscal stimulus to the economy from 8 December.
It consists of $1000 for every child whose parents are eligible for Family Tax Benefit Part A, a payment of $1400 for single age pensioners and $2100 for couples.
The First Home Owners Scheme has been doubled from $7000 to $14,000 and tripled to $21,000 for new homes. The retail sector will benefit from this stimulus package.
At the National Small Business Summit hosted by the Prime Minister last month, extra initiatives were announced including a $4 million program to assist chambers of commerce, Business Enterprise Centres and other registered business organisations in supporting small businesses.
The Prime Minister also announced that the Government will simplify and provide more realistic terms and conditions for government contracts so that small business can compete in tendering processes.
That’s good news for small business, it’s good for competition and it’s good for the taxpayer if there are more businesses involved in bidding for those contracts.
Small businesses that invoice the Government for services rendered and goods supplied will be paid within 30 days. And if government departments don’t pay on time they will be charged interest.
Finally and very importantly for the retail sector and small business development generally is the availability of credit.
The Government has been in constant dialogue with the banks.
They continue to assure us that finance will continue to be available to small businesses where there are existing lines of credit, where there are established overdraft facilities. It may be more difficult at the higher risk end. That is just one of the consequences of the global financial crisis.
Despite the tough economic times the Rudd Government will not be distracted or deterred from its overall economic reform program designed to lift productivity growth off the floor so we can lock in and secure jobs and prosperity for the future.
The Government has enormous faith in the competitiveness, toughness and entrepreneurial flair of Australia’s retailers. In partnership, we can navigate our way through the turbulence being generated by the global financial crisis.
