See her write-up in today's e-magazine
The idea that chief executives are feeling optimistic about the imminent end of the global economic crisis, as the CEO Institute has suggested, is a shaky one. The mass redundancies, the frenzied pressure to have staff working more flexibly, the forced deferrals of trainee programs, all point to a wretched outlook.
Law firms keep hypothesising about when the recession will be over. Allens Arthur Robinson Sydney-based partner Guy Alexander said he expects the M&A market in Australia to see an improved flow over the next quarter, while Mallesons Stephen Jaques Shanghai M&A partner Martyn Huckerby told The New Lawyer he’s expecting a “rapid pick up in transactions” in the next 6 to 12 months. Both reflect a general optimism sweeping through the business districts of Sydney and Melbourne that things can only get better.
According to the CEO Institute research, released on Thursday last week, 58 per cent of the chief executives surveyed believe there will be a return to normal during 2010, with 35 per cent expecting the business outlook to worsen this year.
Ken Gunn, CEO Institute chairman, said members were more positive about the outlook than had been expected, with 27 per cent expecting things to improve this year.
We note the spin in the CEO Institute survey – 35 per cent is actually quite a large portion. Fifty-eight per cent think there will be a return to normal in 2010, which could be at least a year and a half away.
There is a sort of forced optimism around when the global economy will recover. But idealists are ahead of themselves in questioning when the recession will be over. The OECD’s latest economic outlook report offers a bad tasting dose of reality. The question, instead, should perhaps be “when will the recession really begin?”.
As firms tout the pending recovery, their actions are saying something very different. Emails offering flexible hours, forced trainee deferrals, and pay freezes all point to the reality that firms know well the economy is not about to brighten.
Blake Dawson cut 89 staff members last month. This was not done with an inkling that things are about to get better but 'we'll do it anyway', it was done because things are not about to get better and the firm went into emergency mode. And other local firms will follow as they have internationally.
The recruitment market is virtually crashing. Once buying double page advertising spreads in legal business magazines, some local legal recruiters are cancelling $300,000 contracts and are holding tight.
Australia has been protected by defensive political and economic measures, from the bank deposit guarantee, the short selling ban on financials, cash bonuses and the first home buyers grant, not to mention the massive fiscal stimulus package. Many, meanwhile, cling to the technical definition of what a recession is supposed to be – two consecutive quarters of negative GDP. So technically, we’re not even in a recession yet, and we have until June to ignore all suggestions we are.
The OECD forecast is a 4.3 per cent GDP contraction this year, with another 0.1 per cent contraction for 2010. Six to twelve months and we’ll all be back to the black, then, is starting to look a little naïve.
The positive outlook may not really matter of course, except when it comes to affecting people’s jobs. If firms really believe things are going to pick up in the next year, why are they deferring graduates, why are they making redundancies? It’s a spurious claim driven little by facts and a lot by hope.
It would be refreshing if law firms, if not their clients as well, start acting like we’re facing more bad times. Freehills’ recent pay freeze is a nod to reality.