Banjo had the privilege of hosting Alan Oster, Group Chief Economist at National Australia Bank (NAB) on our recent webinar, where he shared his global and Australian macroeconomic outlook. Here’s a brief extract of his comments.
The global economy is slowing in 2022. If it continues to slow throughout 2023, we can expect the main impact in 2024.
The three main regions of concern are: China, Europe and Japan. China’s issues with Omicron, and the associated recent shutdown in Shanghai have had major impact. There have been falls in the Chinese data, retail sales are down 14%, and their central bank has cut rates and added extra liquidity.
The Russia/Ukraine war has of course fuelled concerns about Europe. Commodity prices are currently very high. If Europe and the G7 countries ban Russian oil, to which the Russian economy is very exposed, Russia may cut off gas supplies in the northern winter, which would cause major disruption in Europe at the end of 2022 and into 2023.
Japan’s growth is going backwards at the moment, and only weak growth of around 1.5% is expected later in 2022 and beyond.
Compare this to Australia, where despite a weak start to the year due to Omicron and the floods, there’s been a big acceleration in growth since COVID restrictions phased out. For example, by the end of May hospitality (about one third of the Australian economy) was shooting the lights out - the strongest Alan’s team has ever seen this sector.
NAB analyses data from its 5 million transactions per day, including consumer and business clients. On weekly business inflows, mining and agriculture were the strong performers last year. This year construction, manufacturing and transport are leading the surge, although mining continues to be strong. Given the seasonally adjusted data, retail is meeting the pre-COVID (2019) benchmarks but is still not where it should be.
NAB’s data shows that SMEs are doing well compared to the 2019 benchmark.
However, health and education are still struggling. Elective surgery has been slow to pick up, partly due to staffing issues. In education students are coming back, but not yet in big enough numbers, so the sector is well behind the 2019 benchmark.
In terms of business conditions and confidence, transport and construction are starting to flatten out. The construction sector is still optimistic, but Alan flagged problems on the horizon. This centres around fixed price contracts, which are proving to be problematic now that purchase costs are going up.
Increases in construction, transport, and manufacturing costs are running at around 5% per quarter, with flow-on effects to inflation.
Unfortunately, inflation is going to be around for a while. Alan uses the core inflation figure (as opposed to the headline number we usually read about), currently around 3.8%. He expects this to rise to around 4.5% and stay there for a while.
Where interest rates are concerned, the NAB team predict interest rate rises in June, July, August and November, and expect the cash rate to reach 2.1% by late 2022, then to peak at 2.6% in 2024.
Alan points out that monetary policy takes about 12-18 months to have its impact. “Monetary policy is like a piece of elastic with a rock attached. You pull the elastic, and nothing happens, you keep pulling and then all of a sudden you get a black eye! So it has to be handled very carefully.”
House prices in Sydney and Melbourne have seen a big slowdown, and Brisbane is also starting to slow. There are still strong bank approvals for housing, which is driven by owner occupiers just now. Alan expects that house prices will go down 10% overall, but in the context of the 22% rise over the last couple of years, it’s certainly not catastrophic. Eighty per cent of the home loans in Australia are variable, and on average, homeowners are 4 years in advance on their home loans, so they can broadly handle rate increases. However, some may panic, which will influence behaviour.
Alan points out that household savings are concentrated at the top end of income distribution. The middle-income group are essentially spending what they earn, so the cost of living is set to become a big issue in Australia, with consumer cash flow (and therefore spending) potentially drying up in about 6 months.
Unemployment will continue to fall to 3.5% and stay there till early next year, when it could rise to 4%. Australian wage growth has been below expectations for some time, but the national wage case is likely to pick up soon.
The number one lesson from the pandemic is: don’t have all your supply chain eggs in one basket. If you haven’t already, start to diversify your supply chain. India, Japan and Korea are good sources. Australia should also be strengthening its own manufacturing.
Overall, Alan is optimistic about the economy. The damage to our economy, and the death rate from COVID was considerably lower than other countries, so even with higher interest rates and slower global growth, the outlook for Australia is comparatively good.
If you would like to hear all of Alan's thoughts and predictions for 2022, click here.
Hello and welcome to Banjo Loans Deal of the month My name is Jason Gatt, and I’m the Partner Manager for VIC, WA and Tassie.
I’m excited to share this working capital loan deal with you. It’s for a major supplier and installer of motors for wind farming construction.
Based in Australia, the business is owned by a Denmark company who was then owned by other international firms. They have also been providing ongoing maintenance services for the entire windfarm cycle for almost two decades.
The business has a massive world-wide presence, currently servicing over 17 different countries. Established in 2004, this innovative company Established in 2004, this innovative company and currently has an annual turnover of $25 million.
Approaching Banjo Loans, this business required funding to develop new technology that would replace the usage of expensive cranes for their crane maintenance services arm. Instead of using expensive cranes to lift a Instead of using expensive cranes to lift a would enable them to push the motor into the air from underneath, reducing their largest expense and save between $2 to $3 million dollars a year.
This scenario along with the Australian entity being owned by several overseas firms led to a high level of complexity. The businesses finance broker needed a lender who could, firstly, provide the full loan amount and secondly could understand and be willing to work with the complex ownership structure.
Banjo’s approvals team has the expertise to drill into the ownership structure, and the broker took comfort that we could provide the full $1,000,000 dollar loan amount requested.
A 24-month working capital loan was funded quickly and they now can invest that money to result in the long-term efficiencies in its operations by saving $2-$3 million annually.
Thanks for watching, and if you have customers, you feel could benefit from a Banjo working capital loan, please do not hesitate to call me. Also, please keep an eye out for our soon to be released Asset Finance product.
For more please follow us on LinkedIn at Banjo Loans and subscribe to our YouTube channel.
Hi, and welcome to the Banjo Loans Deal of the month. My name is Brendan Widdowson and I’m the Head of Sales at Banjo.
Today, I will share a recent Working Capital Loan scenario in the retail or grocery sector. This client is an established business owner, who has set up and run several IGA supermarkets and hospitality venues in NSW.
The business had an opportunity to secure a lease and establish a brand-new IGA supermarket. The newly leased land is in an up-and-coming suburb in Queensland, surrounded by several housing developments that require a local supermarket.
The client funded the fit-out of the new premises with working capital from the business, however, required additional funding to purchase stock and other equipment. A referral partner sought out Banjo to assist with this, as they knew we would be an ideal lender for this client.
Despite establishing a new business, the client was eligible for a Banjo loan as they have been successfully running the existing businesses for the past 4 years, with an annual turnover of $1.8M. Due to the business owners’ other ventures performing well, Banjo’s credit assessors recognized the strong financials and ability to repay the loan.
A $250,000 36-month Working Capital Loan was provided within 3 days of their application so the business could move forward with its new venture.
Thanks for watching. If you have any customers you feel could benefit from a Banjo working capital or asset finance loan, please do not hesitate to contact your local Business Development Manager from Banjo.
For more please follow us on LinkedIn at Banjo Loans and subscribe to our YouTube channel.
Hi, and welcome to Banjo Loans Deal of the month
My name is Nick Rogers, and I’m a Partner Manager for VIC and SA
This business is a privately-owned Australian retirement village development and management business. An established business in operation for almost 15 years and has an annual turnover of $16 million, it currently comprises of 404 completed and occupied independent living units.
Their growth goals aim to develop up to 1,110 units. In their plan, their vision is to provide residents with commercial and retail spaces, a 9-hole golf course, and related recreational facilities.
Historically, the retirement village achieved new settlements of 45-55 per year, however the flow on effects of COVID saw the settlements reduced to as little as 17 in FY22. This resulted in the cost to complete funding ratios to be exceeded, as well as delays in earth works and building.
The business approached Banjo for our short-term funding solution in order to pay out builders for outstanding claims, for assistance with the earthworks/construction supplier and to cover GST payments for the following 2 months.
Banjo’s credit assessors reviewed the credit factors and discovered that the directors had a strong commercial background in finance and were considered high integrity.
This business was also a leading retirement village in Australia and was highly profitable.
Due to these factors, Banjo assisted with a 2 to 6 month Single Pay (bridging finance) Loan of $1,000,000 within 4 days of application approval so the business could progress with its vision.
Thanks for watching, and if you have customers, you feel could benefit from a Banjo Working Capital Loan, please do not hesitate to your local Business Development Manager from Banjo. Likewise, please keep an eye out for our soon-to-be-released Asset Finance product.
For more please follow us on LinkedIn at Banjo Loans and subscribe to our YouTube channel.
Hello, my name is Jason Gatt, and I’m the Partner Manger at Banjo Loans for VIC/WA and TAS.
I’m excited to share our deal of the month, in which Banjo repeatedly helped this structural and architectural steel fabrication business overcome cash flow issues and manage its working capital better.
In business for 15 years, this established company have a healthy $2 million per annum revenue turnover, providing support to residential, industrial, and commercial sectors, and met Banjo’s initial eligibility criteria.
The business required operating funds as it was suffering from growing pains, cost pressures due to inflation and lagging accounts receivable that were all having a negative impact on its working capital and cash flow.
Having only borrowed from Banjo for the first time a few short months earlier, Banjo was thrilled they approached us to assist again, having been satisfied with the experience and service they received with their first loan. As Banjo were already familiar with the business and their journey ahead, we were able to increase their funding facility, and provide additional funding to assist with their general working capital and purchasing of materials.
From Banjo’s side, this client had proved to be a quality and reliable enterprise to do business with, with on time repayments on their original loan, we had no hesitation to assist this client again with another loan and help move their business forward.
An original 12-month loan of $75,000 was approved and funded, and then the subsequent additional 12-month loan of $50,000 was provided. Both loan applications were approved and funded within 2 days of the application submission.
Thanks for watching, and if you have customers, you feel could benefit from a Banjo working capital loan, please do not hesitate to call me. Likewise please keep an eye out for our soon to be released Asset Finance product.
For more please follow us on LinkedIn at Banjo Loans.
There is a lot that had happened in the last seven months when we brought you our Economic Outlook Webinar. Banjo once again partnered with David Robertson, Head Economist from Bendigo Bank, and Patrick Coghlan, CEO of CreditorWatch, to bring you this session. This interactive and timely webinar highlighted the current state of the economy locally and globally and its impact on Australian businesses and households.
Despite going through one of the most significant shocks to the global economy, even worse than the GFC, Australia's GDP fully recovered. However, we are now facing a W shaped recovery of the economy.
Hopefully, this means that 2022 will be a robust recovery period, despite the setbacks in Sydney and Melbourne. Also, putting aside the shared optimistic forecast for next year, it will be interesting to see how the economy responds to the $311 billion worth of stimulus in place from the Federal Government.
Some of the topics discussed included:
Before giving you a little taste of each topic below, here's an interesting chart that looks at the baseline forecasts for 2022.
The baseline chart above illustrates that the unemployment rate will fall aggressively in 2022, leading to strong employment growth. The outlook for a strong GDP for 2022 (increasing to 6%) is due to the reopening of the economy and Australia's high vaccination rates. In addition, Australia's confidence levels have been resilient throughout the year. It's also worth noting that the one area highlighted in red is inflation which David covers below.
Below are ten predictions for 2022 presented in the webinar by David.
1. Chinese economy decelerating but can manage a soft landing
2. COVID vaccines the key driver of the global recovery - EU well placed
3. Geopolitical tensions to bubble away- but 'don't bet against the USA'
4. Global reflation underway- technology explosion and infrastructure binge
5. Stock markets supported by low 'risk-free rates', but inflation and ESG focus to grow.
6. Australian economy to grow around 6 % in '22; regional economies outperforming
7. National unemployment rate to trend down to 4 % in 2022
8. Aussie Dollar eventually back above 80 c (holding above 71 c)
9. Property to remain in demand but RBA rate hikes to impact in FY23
10. Commodity prices to remain elevated, exports to hold up resiliently.
It's been the perfect storm for high inflation around the world. With sharp rises to core inflation due to the high cost of energy, import costs and oil. How will Australia respond to these global pressures? David suggests there will be gentle increases in interest rates in late 2022 which will gradually get to 1% in early 2023.
The out performances of regional compared to capital cities is a trend that will not change soon. In regional areas, property prices are up close to 25% in 12 months, and David explains that regional will continue to outperform capital cities. Another challenge is the rise of fixed interest rates.
With solid recoveries in the US, Australia ASX200 (our main index) went from 6000 a few years ago to 7,500. Compared to the US, where the NASDAQ has grown from 16 points to 16,000 points! Australia has lagged due to a lack of innovation, something that needs to be improved.
Customer sentiment continues to be strong into 2022. However, how other states will localise their outbreaks once borders open to NSW and Victoria will be challenging. Business confidence will become strong at the end of the year, and business investment will pick up.
We hope you enjoyed reading this small snapshot of the key takeaways from Banjo's Economic Outlook Webinar. If you are interested in hearing the entire webinar, feel free to drop us an email at info@banjoloans.com Also, don't forget to follow Banjo's LinkedIn company page for updates on our future webinars.
While every business is always on the hunt for new customers, don’t forget how positive, and sometimes lucrative it can be to re-engage with your current and former client base. They are the ones who helped you build your business to date, and they could well be worth another shot.
Developing strategies to reengage with customers can help your business to be stronger and more resilient.
While you undoubtedly have a few clients that are repeat customers it’s also very likely that you have past clients who did business with you and then walked away. Consider ways you can re-engage this valuable group.
Take some time to review your client base, see who has used you historically, or seasonally, and who hasn’t engaged for a while. Keep a look out for any hitherto unnoticed trends that might be there.
It’s important to identify which past customers are suitable prospects. Not everyone who did business with you in the past is going to be worth pursuing again. The most likely candidates will be those who have made multiple purchases previously; or who continue to open your emails
The simplest method is to run a targeted email campaign for re-engagement. It’s a common gripe by regular clients that all the best priced deals are designed to lure new customers, while those who’ve been captured are not rewarded for their loyalty. So consider developing a deal for returning or repeat customers. If that’s not feasible, you can base your comms around a specific event (public holidays, seasonal promotions), or simply an invitation to connect again.
Once you have analysed and identified trends in email open and read rates, you might consider phone outreach to those customers who are engaging with your content. Prepare for the call by having some important information to share, or personalise it by giving them reminders of things you have done together in the past. This is obviously more labour-intensive and requires special sales or interpersonal skills, but it is a worthwhile approach for key prospects.
You might also want to target formerly lucrative clients by arranging a casual catch up over coffee to re-establish the connection.
At the end of the day, you need to give your customers a reason to come back, or to do additional business with you. The onus is on you, not the customer, to prove value.
One of the most important truisms in business is that if you can’t measure it, you can’t manage it. And if you can’t manage it, you can’t improve it. This is one of the reasons why it’s essential to regularly review your enterprise’s hard data. So here are some of the most popular benchmarks great companies use to take their organisation’s temperature and build better balance sheets.
Retrospective figures provide hard facts and established patterns for your business, and provide insights into what you could be doing more of and areas you could change.
Above all, remember cash is king, and the cheapest form is cash generated by the business. You need to understand what drives sales, margins and cash flow to get the most from running your business.
Unless it’s increasing sales a business can stagnate and fail. So the very first measure an organisation needs to focus on is the sales pipeline. It’s essential to record sales that have been made, which products have been sold and to have a way of assessing upcoming sales opportunities.
Some of the key figures businesses should be measuring when it comes to sales include call effectiveness, traction, velocity, quality and change in win rate.
The gross profit margin represents the average gross profit on each dollar of sales before operating expenses (defined as gross profit divided by sales). This is an excellent way of analysing the profit of each product or service type.
The net profit margin tells you whether you’re making a profit after covering all your costs (defined as net income divided by sales).
The four main profit benchmarks every business should be measuring include gross, operating, pre-tax and net.
Running your business to optimise the production of cash brings an holistic approach to business management as it forces a business owner to focus on a number of cash drivers such as inventory management, accounts receivable and accounts payable.
When it comes to collecting data around these three points, a cloud based accounting software package delivers a real time review of your business performance anytime, anywhere and on any device. The data should ideally be reviewed weekly (sometimes daily), and tracked monthly against your forecast budget.
It’s beneficial to compare your performance metrics with industry peers. This information is usually sourced from the Australian Taxation Office’s web site. You should also talk through your performance with your accountant, who should also be able to help you with benchmarks.
Some of the important cash flow measures businesses need to monitor include forecast, actual, free cash and break even point.
Of course, financial benchmarks are just some of the measures great businesses should be assessing: non-financial benchmarks are equally as important, especially lead and lag indicators.
The number of leads, or quotes given or enquiries are used to provide early warning of any peaks or troughs in your sales. Such lead indicators usually provide feedback on the success of marketing campaigns and sales conversion rates.
This measure can provide a good snapshot of your levels of customer advocacy and satisfaction with the service or product you are providing. For instance Facebook, Instagram and LinkedIn follower growth rates coupled with external customer satisfaction surveys can provide excellent data to the business owner.
Most business owners are passionate about fulfilling their dreams and making their business grow and it can be tricky to take a step back and review what’s actually happening in operations.
Working 'on', rather than 'in' your business is what sets apart good business owners from great ones. Simply set aside a little time each day to assess how things are going. Devoting time to instilling basic business disciplines will ensure you're in control and the business is not running you.
Banjo's top three vital cash flow measures:
Cash is king, which means it’s the one variable every business owner needs to be across. Here are three measures to help you understand what your existing and future cash flow position is.
