Most small business have benefited from the strong economic recovery in Australia over the past two years. They have typically improved the strength of their balance sheets such that they are well placed to cope with the current environment of rising interest rates – at least in the short-term. However, those business sectors affected by Covid-19 initiated supply chain disruptions as well as sharp increases in costs and labour shortages, are experiencing some significant difficulty. This is both in financial performance/ profitability, as well as saleability in the marketplace.
International Economic Conditions
High inflation levels experienced by most advanced economies has led the central banks of these countries to rapidly increase interest rates. This has resulted in main asset classes such as shares, bonds and housing prices to decline. In Europe, this situation is further exacerbated by the Russian/Ukraine War, which has forced energy prices up. However, many businesses and consumers have increased their savings, improved financial positions and balance sheets over the past two years.
This provides a level of protection/buffer to offset any economic shocks in the short-term. However, the level of protection will not last if the various countries’ economies fall into medium/long-term low growth or recession.
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