THE IMPACT OF GLOBAL FINANCIAL FLUCTUATIONS ON THE AUSTRALIAN FINANCIAL SERVICES SECTOR

Paul Skene

Business operators have a say at the end of each financial year which acts as the verdict for how well you can expect the market to perform in the upcoming year. When the Small and Medium Enterprise industries of Australia started roaring out regarding how damaged the market can be due to the massive fluctuations in global economy in 2015, they knew it was time to take steps to avoid an unwanted outcome in the near future.

What Are the Fluctuations?

The trend of the world has been shifting towards manufacturing based industries, and this has led to a lot of competition among internationally recognized firms. At one point the need for Australian produced goods and services are at a record high, and the next week results in the stock market being downed by ridiculous points. This competition has benefited customers worldwide but has not exactly been the best for business owners.

In addition, markets all over the world are diversifying and are trying to aim for self-sufficiency to their utmost extents. This has resulted in fluctuations in the aggregate demand based on which Australian based firms produce their goods.

The efforts towards creating a more trade free world have also resulted in there being some problems. As trade embargos and sanctions are lifted or lightened from economies, there are new entrants of products in the markets, and these entrants have made it quite difficult for existing ones to keep producing at the same rate.

How Is the Financial Service Sector Affected?

The impact is indirect. Enterprises are very keen on loaning amounts to give their businesses the jump start they need; but in recent years, many firms have been unable to return their loans which has resulted in the number of bad loans in Australia despite of the fact that most financial services are still making a lot of profit.

This also means that the firms unable to return the amount have not been able to make substantial profits, meaning that the competition is acting as a significant barrier for new entrants to embrace the market.

The second problem is that the overall return to this sector is decreasing, which makes it a worrying figure even if the profits are still relatively super-normal. This can result in the firms in this sector to impose greater compound interest rates, which will significantly lower the degree of financial business within the country.

If the firms look towards global partners for loaning amounts and keep the finances going, they are likely to not find a lot of success because there are not many countries which have industries not indebted. In fact, many of Australia’s own industries in various sectors are considered to be indebted to international forums.

Possible Steps

The Australian financial sector needs to investigate into why businesses are not sparking up and how they can involve the state to play a more significant role in the process. In addition, they need to come up with alternative payment methods from industrialists to recover their bad loans.

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