Kate Mills Reporter

Kate monitors the social and economic dynamics that drive business. She has been a financial and business journalist for 17 years in Australia and the United Kingdom, working on publications including CFO, ALB (Australian and Asian editions), Investor Weekly and Legal Business in the UK.

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Keep austerity at bay

Published 07 June 2012 04:07, Updated 07 June 2012 05:08

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The press reports about the current economic state are feverish. In the midst of market volatility earlier this week, billionaire investor George Soros said the Europeans had only three months to save the euro – he expects the German economy to weaken by August reducing both its ability and desire to help its worse- off neighbours. Comments like these have sparked frenzied sell-offs around the world in markets that are already in a weakened state.

Soros, like many other high-profile commentators who are predicting the end of the euro, is trying to strike fear into the hearts of European regulators in the hope they will agree to allow the European Central Bank to be a lender of last resort to nation states, something to which Germany is implacably opposed. Soros may well be right and certainly it would be helpful if European regulators acted as though they understood the severity of the situation but these kinds of comments have the unintended effect of sending fear into the hearts of both sophisticated and retail investors, feeding the current volatility. (At least we hope it is unintended, it is worth remembering that huge investors like Soros have their own agendas – this is the man that made £1 billion from shorting the British currency in 1992 when the UK was forced to withdraw the pound from the European Exchange Rate Mechanism).

Europe’s woes combined with lacklustre US growth and China’s slowing growth (it seems that anything under 8 per cent is no longer acceptable to global markets) have send local markets into a tailspin. At the beginning of this week, the S&P/ASX 200 fell below the psychological 4000 barrier with billions now having been wiped off portfolios in the past five months.

So what should Australians be doing? We all know that we are the best performing developed market sitting in the best possible geographical location for this period. Sure China’s growth is slowing but it’s not going to fall off a cliff – not if the Communist Party has anything to do with it. It has far more to fear than we do from a slowdown, as it may cause widespread political unrest. The worst thing about all this bad news is that it creates an austerity mindset in consumers and companies. Popular thinking is that if things are going to get bad we should stop spending but the last thing Australia needs is a self-inflicted form of austerity brought about by nervous consumers, investors and companies. Austerity is doing enough harm in Europe. In Australia, we need to keep it at bay.

Instead, it’s a time to focus on growth and innovation. In this mindset, BRW along with innovation specialists Inventium have launched a search for Australia’s 50 most innovative companies. You can find the details at www.inventium.com.au/brw and can download the entry survey at www.mostinnovative companies.com.au. If you are looking for something to celebrate in this time of global gloom, being recognised as a leader in innovation just might do the trick.

This week, it is sadly time to say goodbye to one of our own. Jeanne-Vida Douglas, our indefatigable web editor is leaving BRW for pastures new. We could not have wished for a harder working or more supportive colleague. It has been a pleasure to work with her for the past five years and we know that our readers will miss her insights and lively humour. It's been a privilege to work with her. Jeanne-Vida, on behalf of BRW, we salute you.

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