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The 2- Speed Economy… Getting into the fast lane

To most of the world, Australia’s economy looks like the shining example for western nations to follow. But with a closer look we can see that not everything is economically rosy.

Australia is a great example of a two-speed economy.

The mining industry has sustained its growth despite recent challenges, but things haven’t been quite as positive in the retail and manufacturing fields, where most small businesses reside.

Thanks to a decline in stimulus spending and steadily rising interest rates, many small businesses are feeling the pinch in Australia.

Major Australian banks have been using small business loans to increase their margins, while taking a harder line on delinquent debts forcing smaller businesses to pay down debt before they are ready.

Fewer and fewer banks are giving loans to small businesses as well. That lack of choice combined with rising interest rates and inflation, have left many small businesses feeling squeezed.

Low unemployement has been great for the general psyche of Australia, but it has led to six recent interest rate hikes as well as inflation that is predicted to reach as high as 2.75% this year.

The good news is that consumer confidence is high, thanks primarily to the fact that most Australians have jobs. The bad news is that, for all the work to be had, fewer retail and manufacturing companies are thriving, leading to concerns about Australia’s long-term economic prosperity.