This federal budget is all about confidence!  Confidence in the economy springing back next year, confidence in consumers deciding to spend their federal income tax cuts, confidence in the banks loosening the purse strings, confidence in small business owners to keep staff and now have employee layoffs, confidence in the world economies to start importing Canada’s natural resources again, but most importantly, confidence by the American population to start spending again.

In today’s fractious world of Canadian politics I am not surprised to see a budget full of money for all those industries which are in financial trouble with the economic downturn.  I am also not surprised that the budget also included money for groups which seemingly weren’t necessarily in trouble but could always use more funding. ie. Cultural funding increase.  The funding for different groups is basically to appease Liberals so as to not potentially cause another election call in 2009.

Canada like all other countries right now needs to have further increases in cash flowing back into this fragile economy from the banks, venture capitalists, private equity.  But how is this going to happen?  We need for the economies to truly get to the bottom before these financial groups will bring money back into the economy.  It’s a cherry picking game out there right now.  All these groups are choosing from a multitude of different investments, companies, funds to invest in wanting to get the best rate of return possible.

Unfortunately, I believe we’re going to have more bad news before we get some good news late in 2010 or 2011.  This bad news however, can bring the North American economies to the bottom and allow us to build it back up, with more regulations.  I think we’ll see that from President Obama and that is a good thing in my mind.

The message to small business is to hang on, but take action.  Treat your customers better, communicate better, continue to do marketing as various studies over history have shown that companies that cut back on these items do worse than the companies who continue to market.

Let’s hope that confidence returns slowly and we build our economy the right way rather than the wrong ways of the past decade.

Written By: Richard Wong, CMA     rwong@firstchoicecapital.ca