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The Economic Scene
In the early months of the financial year, the economic scene is sluggish, with lower than normal economic growth, low inflation and a cut in interest rates. There are still major problems in certain business activities and locations around Australia. The key areas for small business operators to monitor are:
Growth of the Economy (GDP – Growth Domestic Product)
Whilst there has been some positive growth, it has not yet returned to the 4% trend at which the economy has generally performed. It is likely to continue in this manner for the reminder of the financial year, unless there is a major wages breakout, which will significantly affect the inflation rate.
The Australian dollar is very high, especially compared to rates that were evident 41/2 years ago, when the Australian dollar was 57 cents against the US dollar. The US dollar rate against the Australian dollar is currently at $1.05, which is good news for importers and Australians travelling overseas, but not for Australian exporters or the tourist industry relying on international tourists visiting Australia.
Cashflow management is still a high priority issue for SMEs. If you are preparing budgets for this financial year, it is a good idea to prepare three separate sets of budgets, comprising:
Most likely outcome;
Most optimistic scenario; and
Most pessimistic scenario.
If you would like assistance in the preparation of budgets and cashflow forecast, or a review of your cashflow management procedures, we can help.
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