Shifting Economical Environments – an opportunity for growth
The Australian economy continues to face serious obstacles, with challenges highlighted across key metrics and multiple time-frames. Growth forecasts are weak, interest rates are at an all-time low, and numerous industries are struggling to forge ahead. Despite these serious challenges, or perhaps because of them, current conditions also present an opportunity for growth.
The International Monetary Fund (IMF) recently projected that the economic growth in Australia would fall by 6.7 per cent in 2020 as the world deals with the economic fallout from COVID-19. However, the IMF is forecasting Australia to grow by 6.1 per cent in 2021.
Unemployment, on the other hand, is expected to grow to 7.5 in 2020 and 8.9 in 2021. Meaning that while production might bounce back, we are likely in for a much more difficult recovery on the employment aspect., especially for sectors like hospitality, retail and tourism.
Labour productivity is another key indicator of economic health, with the amount of output produced per hour worked falling 0.2% last financial year, which is the first annual decline since ABS measurements began in the mid-1990s.
Falling labour productivity is one of many factors affecting wage growth, with average pay packets up just 2.2% over the year. While public sector wage growth continues to outpace the private sector at 2.5% and 2.2% respectively, wages in the retail, manufacturing, and construction sectors are only just above the rate of inflation of 1.7%. There is a very good reason for such anaemic growth rates, with industries across the country struggling to get a foothold in the economy let alone find room to move.
Even before the Coronavirus, retail spending was at its lowest rate since the 1990s, manufacturing industries are struggling, and productivity in the construction industry has fallen by an average of 4.3% over the past three years. The government’s reintroduction of the ABCC in 2016 has been unable to improve conditions on the ground, with the construction sector recording a 3.4% fall in output during the 2018-19 financial year. The ABCC is just one of many failed initiatives to stimulate the economy, and the defeat of these multiple initiatives is more indicative of our current slump than the figures themselves.
After multiple efforts to stimulate the economy, the RBA has continued to drop the official cash rate to record lows (0.25%), and the government has introduced key tax initiatives in an attempt to boost spending. If wages continue to struggle, household debt remains high, and the government fails to provide more economic stimulus, rates could easily slide to 0.0% in 2020. A similar situation exists regarding the latest income tax rebate, which was supposed to ignite spending but mostly ended up sitting in savings accounts.
Current conditions may be challenging, but they also highlight opportunities across the construction industry. Like many industries, the property market is facing unprecedented difficulties that will test even the largest organisations. While any Home builder can perform well when times are good, businesses need to strategise in the right way if they are to thrive in the current economy.
Home Builders that have embraced collaborative partnerships have been able to differentiate themselves and create high value propositions, outperforming their competitors by 14% cumulative growth over the last 4 years.
In today's complex and challenging economic environment, each piece of the financial equation contributes to your success or failure. At Intrax, we focus on contextual business alignment and strategic thinking, with innovation and technology upgrades applied in order to improve financial outcomes. When you work with Intrax, you begin to see opportunities everywhere, and learn to leverage the current economic conditions to your advantage.