Growth Steady, but Risks on the Horizon
The Australian economy has enjoyed a 27-year run without recession and the Reserve Bank of Australia is predicting a 3% growth in GDP in 2019, but slightly lower growth in 2020. The rate of unemployment is lower and may reduce even further this year.
The Australian resources sector has strengthened with several major LNG production facilities coming on line which has boosted export income. Similarly, China continues to have strong demand for Australian commodities, especially iron ore and coal. There are several major projects still under construction.
However, there is a number of growing risks to the Australian economy leading industry leaders to be nervous about deteriorating business conditions this year. The risks include:
- The federal election is to be held in May 2019 with a change in government likely, making business very cautious;
- In the event the Labour party takes office, this could result in significant industrial relations issues and increasing labour costs;
- A long running and devastating drought troubles the farming sector in every state;
- Global trade tensions, especially between China and USA are a concern;
- Slower growth than expected is seen in Australia’s major trading partners;
- Brexit outcomes;
- Stronger financial regulations and tighter credit conditions are expected to limit the ability of business to source capital to invest in expansion, leading to less bold settings;
- A lack of consumer demand is due to falling real estate values and equity in most Australian capital cities;
- There is an underwhelming view of political leadership on both sides of the political divide;
The demand for skilled professionals and executive talent is expected to be moderate this year. Greater demand will be experienced in infrastructure construction, engineering, life sciences, information technology (digital & business transformation), risk, compliance & insurance, renewable energy and business advisory services.
For further insights, please contact Allan Rae, Managing Partner, Cornerstone International Group Australia allan-rae@cornerstone-group. com