Straight Talk Interviews – Peter Switzer

“The businesses that do well when they’re really challenged are the ones who think outside the square.”

June 2, 2020.

Mark Bouris sat down with leading economic commentator Peter Switzer to give you an update on the Australian economy, to discuss options for business owners during this period, and to break down some of the media hysteria around the property market.

Peter Switzer is one of Australia’s leading business and financial commentators, launching his own business 20 years ago.

“The economy is rebounding now”

A steady recovery for Australia’s economy is expected by Switzer. “There will be some companies that say, ‘All these people that went home, I don’t know if I need them to come back into the office’. So landlords will get a bit of challenge from people trying to reduce the size of their office.”

“Then there will be some businesses who say ‘all the people who are on $300,000 a year, well things are a bit tougher now, so let’s knock them down to $250,000’. So there will also be a reduction in salaries. Therefore that will knock down the enthusiasm for people to play high prices at auctions and so on.”

“There’s going to be that adjustment process. I’ve found over time that even when the economy rebounds quickly, unemployment is a really slow lag improver. It will take some time.”

Will the government extend Job Keeper?

With the Job Keeper payments originally expected to end in September, there has been strong debate about whether the government should extend the $1500-a-fortnight measure beyond September.

“The government has a June review of Job Keeper,” said Switzer. “They’re trying to do their own independent analysis of what’s going on.”

“I think they’re going to put it on business owners: ‘You told us you weren’t going to do well. What is your position now? If you still think your business is well behind in terms of revenue, and you’re entitled to get Job Keeper, then reapply’.”

“If I have a cafe in the CBD and by end of June everyone’s back in the CBD, then you wouldn’t have any reason for having Job Keeper a part from paying catch up from all the losses previously.”

“We won’t go back to where we were before. The economy will not be growing as fast as it was, but the whole economy will be okay.”

“They’ve never closed down economies before”

Switzer said down turn in various markets, particularly the stock market came from “this curveball called the coronavirus.”

“When [coronavirus] came along and governments said ‘Oh, we’re going to close down the economy and lock people up’, people thought, ‘well this has never happened before in our lifetime’.”

“So what happened was the stock market sold off on uncertainty, no one could work out what was going to happen to the various companies.”

“Remember all share prices are a function of ‘what are the profits in the future’.“

“If you close down the economy, if you lock up consumers and businesses, what can you expect? So that drop in the stock market in Australia of about 38% was investors not knowing what was going on.”

Switzer says the next curveball was the enormous amount of stimulus thrown at the economy by the government and the central banks, which according to him was something they had to do: “They knew they had to do it because they’ve never closed down economies before. They didn’t close it down during the GFC. They didn’t even close it down during the Spanish flue. So, this is the first time the government has done something like this.”

What should small businesses to focus on?

“I think the argument always is when you’re in business, you’ve got to play the game that’s in front of you, not the game that you thought would be in front of you.”