INTEREST RATES OUTLOOK

RBA WARNS RISE
That surprise statement last week by the Reserve Bank which issued a blunt warning that interest rates are likely to rise soon certainly made an impact. While observers say this is in response to the resurgence in the housing market, the RBA cited various pressure factors such as wage pressures, the rising prices of raw materials and worrying debt levels together with the likelihood of inflation reaching 3 percent by year's end.

U.S. FREE TRADE
Among the largest business items on the agenda for this year is the implementation of the Free Trade Agreement with the U.S. Despite a rocky initiation and some criticism from vested interests, the agreement has been finalised and is now being implemented. Analysts say it will be at least six months before a true picture begins to emerge.

REPAYING THE DEBT
Concern is growing in the business community about one of the promises the re-elected Federal Government made last year to reduce the national debt. If this is to be kept, 2005 will be the year action may be taken and lobbying is already underway from many business interests to ensure their sectors remain free from budget cuts or cost increases. Currently, Australia has one of the lowest levels of government debt in the world at just three percent of G.D.P.

BUSINESS NEWS

CONFUSED INDICATORS
More conflicting messages from too many experts is how last week’s warning from the Reserve Bank was greeted. On the side of an economic slowdown is the latest set of consumer spending figures from retail, which with negative business statistics from the NAB back a worrying general trend. This is supported by the latest ANZ Jobs Survey citing a reduction in January adverts. But in contrast, Dunn & Bradstreet’s current information is that business expectations continue to hold up very well, which with Macquarie Bank’s latest strong employment survey numbers indicate the RBA’s view could be justified.

RED TAPE COSTS RISE
According to the Australian Industry Group (AIG), the current costs of local manufacturing meeting government red tape now totals nearly $700 million annually. The group say manufacturers spend an average 102 hours a month managing compliance and the problem is greater for smaller companies which cannot spread the load across a large employee base. The AIG is encouraging all employer bodies to become very active in taking the fight to governments.

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THE OXFORD ADVANTAGE

Case Study: Labour Hire Restarted and Prospered with Funding

A Sydney-based labour hire business specialising in temporary labour hire to government bodies and major corporations rapidly grew into a $15 million turnover company following its 1995 start.

The management realised the need for smooth cash flow to meet operating expenses but found their debtors were taking too long to pay. Staff needed to be paid weekly, while the debtors paid on average 45 days from invoice. In some cases this company was required to make six payrolls before they got paid.

Inevitably, working capital began to be sourced at the expense of taxation provisioning. This coupled with an unfavorable taxation judgment (the Drake case) and management’s lack of focusing on core activities, eventually led to the company being placed into external administration.

This was an extremely frustrating time for management; the business had built up a strong loyal customer base and there was the opportunity to restart the business. Banks were reluctant to assist further so the directors turned to Oxford Funding.

Since establishing a full service Debtor Finance facility with Oxford over 18 months ago the company has prospered. The directors have been able to trade with strong cash flows and taken on more government work.

The result was a consistent cash flow that helped rescue the company. But just as importantly it has allowed the directors to concentrate on expanding their sales opportunities and growing the business profitably.

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To find out more about the benefits of Debtor Finance please contact Oxford direct on 1800 850 509. Alternatively visit www.oxfordfunding.com.au.

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