More consumers are backing Australian businesses, and the federal government is spending $1.5bn to support local manufacturing. Linden Toll, CEO of invoice finance provider Apricity Finance, urges SMEs to capitalise on this momentum.
With some optimistic economic data from early December 2020 indicating that the COVID-19 recession is over, now is the time for Australian SMEs to prepare themselves to hit the ground running as the economy begins to rebuild.
The pandemic quickly exposed the vulnerabilities of Australia’s manufacturing sector, particularly its over-reliance on imported products and the weakness of its domestic supply chains. The sudden spotlight on the sector highlighted that where Australians choose to spend their money can have a profound impact on the nation’s economic future and self-sufficiency.
International border closures have led to a rise in demand for domestically sourced goods and services. Businesses have had to look inwards and be resourceful as they deal with long delays in their overseas supply chains.
SMEs have a unique opportunity to scale their businesses to meet this emerging demand, particularly as the nation comes to grips with the new ‘COVID normal’ of regular infection clusters and constantly changing social restrictions.
COVID-19 has also brought the importance of having essential medical supplies available, which are required to respond to illness and infection, to centre stage. Medical supplies used in Australia are mainly sourced through a tedious international supply chain, with about 68% coming from the US and Europe.
In response to the closed international borders, the federal government said it was working with local industry to increase domestic production of medical protective equipment, such as face masks, sanitiser, surgical goggles and gowns.
Further, the $1.5bn Modern Manufacturing Strategy announced by Treasurer Josh Frydenberg aims to strengthen supply lines for essential goods and help manufacturers upscale their businesses. While Australia needs to innovate and create new industries to recover from the pandemic, supporting existing domestic manufacturing through the Modern Manufacturing Strategy can make the most of Australia’s skilled workforce, realising their capability and increasing output across sectors such as mining and infrastructure.
Positioning Australian manufacturing for sustainable competitiveness is a long-term vision, and the government’s strategy is a 10-year plan. Its bolstering of the local manufacturing industry will both assist with the economic recovery and provide opportunities for SMEs.
Data from McKinsey & Company revealed that consumers, especially those less financially affected by the restrictions, actively switched their spending to prioritise buying from local businesses and producers as a result of COVID-19.
Buying from local manufacturers also plays a role in creating jobs and boosting the economy at every level, from local to national. The nation will always require some products to be imported, but the federal government’s priority needs to move further towards local manufacturing. It’s taken the pandemic for the government to realise that processes must be put in place to reflect what manufacturing will look like in the world moving forward.
When it comes to making the most of government initiatives and resources, and accessing available funding, we encourage SMEs to speak to their trusted advisers. As brokers, you have a key role to play in guiding your clients through the evolving business environment, and cash flow management will be more important than ever in steering SMEs through the aftermath of the pandemic.
Australia is in a good position as the recovery begins. Recent data from Deloitte forecasts that business investment will increase by 3.1% and public spending by 7.8%. The job market is also showing positive signs of recovery, with 300,000 people expected to return to work and more than 270,000 to gain jobs in 2021.
These indicators, along with the government’s investment, present opportunities for businesses. SMEs need to be reviewing their business plans and growth strategies to maximise these opportunities.
SMEs are increasingly looking at non-bank alternatives in sourcing finance that better suits their business needs. Invoice finance is one such option, allowing SMEs to leverage their invoices to access their own funds sooner, without taking on additional debt.
At Apricity Finance, we understand the challenges of running a small business and how flexible thinking can help SMEs achieve growth. With our invoice finance solution, SMEs can take control of their cash flow so they not only survive but thrive.
In 2020, millions of Australians had to deal with adversity, from droughts to floods, bushfires and a global pandemic. At the same time, they responded with generosity to those in need and ingenuity in business thinking.
Fiscal policy will strengthen the domestic manufacturing industry and boost supply chains post pandemic (amid the China trade turmoil) – but that’s just the first step. As onshore manufacturing increases beyond 2021, so too will the ‘buy local’ mentality. This consumer trend will last long after the pandemic, particularly as COVID-19 has highlighted the importance of SMEs to the Australian economy.