FINANCIAL CRISIS AND THE VISUAL ARTS IN AUSTRALIA

EXTRACTS FROM TOM LOWENSTEIN’S ARTICLE REGARDING THE FINANCIAL CRISIS AND THE VISUAL ARTS IN AUSTRALIA

THE PRIMARY MARKET

Over the past decade the primary art market has experienced a healthy growth. To date, the impact of the recession on the primary market has been limited and in no sense has this market collapsed. Generally good art by recognized artists has continued to sell well in Melbourne, Sydney, Brisbane, and Canberra. The less well established artists have had some difficulty in achieving sales over say $10,000, although sales of smaller paintings, works on paper, and graphics have experienced a modest growth.

THE SECONDARY MARKET

It will be interesting to see the first round of auctions in the next few months. In the second half of last year, auction houses had been showing signs of strain. In part, this was due to the lack of high quality stocks to maintain the frequency of more than 30 major art auctions per year.

GENERAL TRENDS

Over the last couple of decades, there has been a marked shift from the “art collector” to the “art investor” / “art speculator”. It is without a doubt that auction houses and secondary art market consultants have been instrumental in promoting art as an alternative investment.

This has been to a large extent assisted by the Australian Taxation Office’s recognition of art as a legitimate form of investment and its acceptance that even a certain percentage of a superannuation fund can be invested in art (subjects to prudent conditions and guidelines).

It is considered, that the economic downturn will affect the secondary art market to a larger extent than the primary art market. While it is expected that collectors and investors will continue buying good art at reasonable prices, speculators will be reluctant to return to the fray.

Without a doubt, artists, like the general community, will all experience and feel the impact of this financial downturn. However, in most instances, the impact can be managed, and the negative consequences can be minimized.

SUGGESTED STRATEGIES

1. It is suggested that artists consult their accountants or financial advisors to put in place contingency plans for, say, next two years. It is suggested these advisors be instructed to prepare a budget for expenditure. In many instances, the difference between anticipated income and budgeted expenditure will create deficiency. We suggest that artists, who do not have reserves to cover this deficiency, but have equity in their property (or some other security), approach their bank to provide a facility to cover this deficiency. We do not suggest that artists actually borrow the money, but that they arrange for their banks to put a facility in place, in case it is needed. In these circumstances (with the exception of the facility fee) interest is only paid on the overdraft.
2. Recent observations from exhibitions and reports from galleries and artists suggest that with the exception of some well-established artists, sales in excess of $10,000 for individual works are becoming more difficult to achieve. However, more sales have been achieved in the lower price bracket. When planning an exhibition, an artist could give a consideration to include a number of smaller items (including works on paper and / or graphics) to complement larger / major pieces.
3. It is essential for artists to continue their dialogue and relationship with their commercial art galleries. Artists should avoid the temptation to by-pass their dealers and resort to studio sales. This can have negative consequences and impact the artist’s prices for many years in the future.

CONCLUSION

While it may sound like a euphemism, not to view the recession as a crisis, but as an opportunity, this could provide artists with a bit of time to reassess their work and their direction, and to embark on new projects, which could come to fruition when the fiscal situation improves.

Read the full article on www.lowensteinsarts.com.au