Tough Times for WA Business But …..

February 21, 2017

WA is in “recession” and is experiencing a period of transition from the recent mining boom, which has tapered off in the past couple of years, to more normal economic conditions. The changing environment has been gradual with no “big bang” of corporate insolvencies or mass mortgage delinquencies which have characterised economic downturns in the past.

A couple of factors are at play – interest rates are at an historic low, the ATO has acted like a “banker” in providing repayment terms on taxation arrears (although this stance now appears to be hardening based on recent press releases) and financiers (particularly the Big 4 Banks) are reluctant to trigger formal insolvency appointments to manage their reputational risk in light of recent parliamentary inquiries.

Notwithstanding these tougher financial times, many WA businesses have, over the past number of years, taken the opportunity to pay down debt and with interest rates at historical lows, finance costs are not the major expense they once were. Competition amongst banks for quality business customers is also extremely strong as they try to protect their revenue base in a low growth environment. The combination of these circumstances means that advisers can play a key role in supporting their clients’ business futures.

WA is in challenging times but well run businesses should be looking at the current circumstances to grow their business for when the upturn inevitably happens. It is also a time where businesses need to be keeping a careful eye on their financial position and interpret and adapt to changing market conditions accordingly.

In the current economic climate, Quadrant Advisory is ideally placed to assist businesses in strengthening their banking relationships to either grow their activities or to pick up early warning signs and ensure they are proactive in communicating with their financier to achieve positive outcomes.