Squeezing ourselves through each month of this current credit crunch, we find agreement on one point. Economists, employers, employees and financial pundits concur that uncertainty remains the constant feature of the new world economic order. According to one economist, however, that’s a good reason for us to prepare for the more predictable times ahead
Despite admitting a penchant for pessimistic forecasts, Nick Tuffley, chief economist at the ASB, recently told members of the New Zealand Sign and Display Association (NZSDA) that they should prepare for better opportunities and eventually for improved economic conditions, although the rest of the year would still present challenges.Tuffley said that although the economy will contract during 2009 with a weak housing market, consumer spending down, and exports under pressure, not everything would happen at once. He said, “It’s not going to hit us all in one go, but things will change over the course of the year. Hopefully, we’ll be out of the recession toward the end of the year. Once people get the feeling that we’re out of the worst, that’s when we’ll see more signs of recovery.”
He also mentioned the big industrial shock wave going on the larger manufacturing sector. He said, “When people don’t buy, manufacturer’s orders dry up. It’s been a rapid shock to much of the industrial base but the good thing for most of us is that most of our exports are food. Food never goes out of fashion.”
No one knows the future
Some of the assembled NZSDA members may have felt uncomfortable when Tuffley said that no one knows exactly what is going to happen with the economy. However, he explained that the frustration economists face in analysing economic data derives from the fact that the information always arrives after the event has occurred. He said, “Looking at economic data is like driving forward and looking in the rear vision mirror.”
He commented on the official cash rate, but warned about the dangers of basing your actions on guessing what Reserve Bank governor Alan Bollard might do next. He said, “It’s pretty hard to predict what the Reserve Bank is going to do, though it looks likely it will cut down to two and a half per cent from three per cent. For rates to come down any more, you’d need a crisis coming from overseas.” Our dependence on exports and overseas conditions matters to all of us. Tuffley commented, “We’re not going to get a sustainable recovery here unless our export markets pick up.”
Significantly, Tuffley gave advice to NZSDA members in relation to action they could take to improve their bottom line in the recession. He said, “Watch out for opportunities. For example, offer, or take advantage of, prompt payment discounts to free up cash flow. This gives you negotiating power. Also take advantage of the current low interest rates perhaps by fixing debt for longer terms.”
On an optimistic note, expressing faith in New Zealanders ability to cope with new challenges, Tuffley added, “One thing we are good at is adapting to circumstances. That number eight wire mentality stands us in good stead.”
Sponsored by Halifax Vogel Group, Jenrite and TintPro, the breakfast meeting in Auckland hosted 40 people. Joe Hulsdouw, ITO rep for NZSDA said, “We see these meetings as a good way to get things started for the year. Most of the members know each other so there’s a lot of good conversations going on. We asked ASB here because we wanted to give our members something they could use.
What can you do to face down the credit crunch?
• Focus on what you can control – remember the old saying, “So what; now what?”
• Contingency planning is better than making forecasts. Ask, “What if it goes well? What if it goes badly? What if it goes disastrously?”
• Be prudent with debt – lower debt brings more flexibility
• Pay your creditors promptly – late payments put everyone under stress
• Profile your debtors – find out who is paying late. That’s your cash flow they are sitting on
• Watch actively for opportunities eg prompt payment discounts, fix debt for longer terms (lower interest rates)
• Expect change and keep up to date
