The nightmare of wondering what the world's coming to
At least the World Bank’s latest analysis of the global economy seems to put an end to the nightmare of business operators wondering where it might be headed. It’s not a cheery prospect but knowing what’s ahead at least provides opportunity to prepare for it.
Obviously, wars in Ukraine and the Middle East are having international repercussions but the World Bank is unequivocal in its assertion that Donald Trump’s trade war is doing the global economy more harm than anything else.
According to the Bank it’s this prospect of trade war that’s the major factor weighing on economies worldwide to the extent it will put global economic growth on track for its weakest performance since the 1960s, from what is now its lowest level since the 2008 GFC.
The Washington-based World Bank isn’t forecasting Trump’s tariff shenanigans will trigger global recession but makes it clear it expects average global economic growth in the first seven years of the 2020s will be the slowest in any of the past five decades.
And based on the assumption that tariffs worldwide will remain for most of the rest of this year more or less on their late-May levels, the Bank’s latest report downgrades expectation for global GDP growth this year to 2.3% from the 2.7% forecast in January.
The situation in a nutshell
According to the report: “The sharp increase in tariffs and ensuing uncertainty are contributing to a broad-based growth slowdown and deteriorating prospects in most of the world’s economies.
“Turmoil unleashed by heightened trade tensions has prompted the Bank to cut growth forecasts for almost 70% of economies worldwide across all regions and income groups.”
Ballooning government debt levels are forecast for developing economies, and credit rating agency Fitch Ratings says that already global trade war escalation, uncertainty over the endpoint for tariffs and their impact on global trade volumes, supply chains, investment and international relations, have delivered a significant adverse global economic shock.
Since returning in January for a second stint in the White House’s Oval Office, Donald Trump has increased import duties on most of his country’s trading partners. It’s been a deluge of imposts on a range of key goods including steel and cars, which, from 9 July is expected to be expanded with so-called “reciprocal tariffs” – despite current negotiations and these levies being under legal challenge.
Talks are on-going trying to ease the international impact of US tariffs, but it’s already clear their erratic implementation and unpredictability are tending to destabilise long and universally accepted rules of trade, to the increasing concern of many businesses and consumers.
Meanwhile Australia stagnates
And there’s frustration to add to their concern.
Australian businesses’ rate of tax at 30% is the highest in the world – although small businesses may pay only 25%. While of course many people believe there are good reasons for running an existing business or establishing a new one in this country, it’s disastrous for our economy that so many don’t.
This of course is because non-starters are aware of media reports of mounting insolvencies, they view the tax system as inequitable, fear inevitable entanglement in red tape, and note that an increasing number of businesses long- established here are either shutting down or relocating in other countries.
In short, while there may be good reasons for running a business in Australia, there are also good reasons why too many local and overseas investors are declining to do so.
For example, they’ve just witnessed an unprecedented surge in Australia’s business insolvencies in which 14,105 companies collapsed in the 2024-2025 financial year -- a 26.8% increase on the previous year.
On 14 May the Macks Advisory newsletter warned the business community, by way of an article headed “The existing regime is ineffective in dealing with record insolvencies”, to be prepared to deal with this.
What has come to pass has been due mainly to rising operational costs, weak consumer demand, aggressive ATO debt collection, and a proliferation of second-tier lenders offering quick financial solutions that have enticed struggling businesses into unsustainable debt.
Industries hardest hit by insolvencies in the financial year recently ended are construction (3,417, an increase of 14.8% on the previous year), accommodation and food services (2,352 up from 1.668), and transport and warehousing (681, up 45%).
Conclusion
Record Australian insolvencies indicate multifaced problems that are undermining the business community.
True, government interventions and economic relief measures are offering some companies a measure of respite, but for most CEOs it’s vigilance and adaptive strategies that will be necessary to get them through the intensely challenging business landscape now confronting them.
However, if the Albanese Government did no more than rejig the tax and regulatory systems to ease the cost of doing business in Australia, if it did no more than ensure multi-billion-dollar businesses, (many with international owners) pay tax at a rate they should be paying, then our country would have a strong economy rather than one currently threatened by stagnation and whatever President Trump may or may not have in mind.
Why would owners of big businesses want to operate in Australia when they can do so elsewhere more easily and more profitably? And surely, it’s more profitable for Australia for businesses to be paying a lower tax here than not being here to pay tax at all.
