Business IQ

What can the Greek crisis teach Aussie business?

Jason Cunningham
Entrepreneur

Jason Cunningham is a finance whiz, speaker and media personality that can be heard on SEN1116 and The Living Room on Channel 10

Jason Cunningham
Entrepreneur

Jason Cunningham is a finance whiz, speaker and media personality that can be heard on SEN1116 and The Living Room on Channel 10

The challenges being faced by Greece at the moment may not have a direct impact on Aussie business, but there’s a lot to be learned from their situation.

The Greek situation naturally got me thinking about how Aussies are going to be impacted.

The people of Greece gave a resounding ‘No’ in the referendum vote, overwhelmingly rejecting the austerity measures called for by creditors as part of the next bailout payment, but the recent deal means significant measures will be implemented to bring debt into line. It’s likely to be a tough process.

Historically speaking, the government has been reluctant to implement the recommended measures like increasing taxes, better policing tax avoidance, raising the retirement age and reducing the size of or access to the pension. This reluctance will need to be abolished under the terms of the deal struck with the Eurozone and IMF.

From afar, it seems a classic case of ‘living beyond your means’. Or in other words, getting money for nothing.

If a continuation of the crisis saw Greece ultimately leave the European currency (which is unlikely now the terms of the deal have been struck) it could have had a profound impact on the Greek population. Even with the new deal, deep, painful recession is the expected outcome for Greece, with a potential flow-on effect for other European countries.

The precarious Greek banking system, already ground to a standstill in an attempt to avoid a total banking system collapse, surely can’t take much more.

On the bright side, a plummeting local currency will mean tourism and exports will be much more attractive.

The lesson? Very few get money for nothing for long.

Greek flag flies on a blue sky

The impact on Australia

So what are the implications for Australia? Not much, really.

Yes, the local share market got spooked and dropped a couple of per cent. The ASX has shed $20b and our dollar hit its lowest point in six years (though this was based on a combination of factors). But we’ve already seen a rally since the first real fears of a Grexit hit the market – so any effects are likely to be temporary.

To put it in perspective: Greece’s GDP makes up around one quarter of one per cent of the world’s GDP. The Greek economy is actually smaller than Victoria’s economy.

It’s understandable that this Greek tragedy (I had to go there) has captured our attention – it’s a unique challenge to the EU, and according to the 2011 Australian census, the Greek population ranks within Australia’s top countries of birth, and has done for a decade or more.

Lessons learned

Whether a business, household or country – if you take on too much debt, you can get choked out.

There are business owners (or households) hurting just as much as Greece. They’ve overcapitalised, and are under severe cash flow pressure. It only takes one debtor to fall over, one payment to be missed, and you’re stretched too far. Your credit rating can be affected, making it hard to secure finance through the traditional channels. Like Greece, you become reliant on friends, family or financial institutions to give you a loan.

The solution? Face debts head-on and deal with it – then you can start the process of negotiating a better deal, and put a plan in place to get back on track. You can’t underestimate how liberating this can be. 

Have we got it wrong?

Another way to look at this whole saga – which is pretty controversial for a finance commentator – is to ask: have we got it wrong?

Is our ‘growth at all costs’ mantra sustainable? More to the point, will it give us the quality of life we all were promised… or have we become bigger slaves than ever to the machine, needing to work longer and harder to pay for our prosperity? Putting more focus on lifestyle, while not great for the economy, definitely is good for the soul provided we don’t expect to maintain the same living standards, of course.

If we as business owners can’t lead the charge to a better work/life balance… who can?

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